The Impact of Fiscal Policy on Economic Growth of Afghanistan

This paper intends to examine the impact of fiscal policy implementation on GDP growth of Afghanistan for the period of 2003 to 2019, and the Autoregressive Distributed Lags (ARDL) model has been used to estimate its coefficients. It is mentionable that, to identify the qualifications of time series data and to choose appropriate model for our empirical study, we have used from Augmented-Dicky Fuller test to evaluate the stationarity of the variables. The estimation results show that the government expenditure has a positive and significant effect on economic growth of Afghanistan and its coefficient is almost 5 percent. In the meanwhile, the government expenditure has significant impact in different lags on GDP growth and shows long run relationship with economic growth. Moreover, the economic growth also has impact on itself but it is not serious. Although the estimation results argue that the fiscal policy has significant effect on economic growth of this country but it is just 5 percent which means that if the government of Afghanistan increases its expenditure one percent, the GDP growth will increase by 5 percent