Vector Auto-Regression Application on Macroeconomic Variables of Pakistan’s Economic Growth

Abstract

The main purpose of this article is to determine the significance of macroeconomic variables on Pakistan’s economic growth with the application of vector autoregression (VAR) modelling using annual time series data. The quantitative evidence shows that real per-capita income growth is caused by money-supply. Exchange rate policies, government spending and money supply are significant in the regression of Investment. Similarly, exports and exchange rate policies affect the growth of real per-capita money supply. Forecast errors have been generated for both models using Variance Decomposition (VDC) analysis