Assessing the Symmetric and Asymmetric Impacts of Fiscal Decentralization on Living Standards in Pakistan. An ARDL and NARDL Approach

Abstract

This research focuses on investigating the symmetric and asymmetric effects of fiscal decentralization on living standards in Pakistan. It examines how living standards are affected by the multiple dimensions of fiscal autonomy nationwide. This study uses the Autoregressive Distributed Lag (ARDL) and Non-linear Autoregressive Distributed Lag (NARDL) models to examine fiscal decentralization and living standards, focusing on symmetries and asymmetries, using time-series data at annual intervals. The study shows that fiscal decentralization has both positive and negative long-run and short-run effects on living standards in Pakistan. However, the positive effect improves living standards more strongly than the negative impact affects it. By highlighting the importance of strong fiscal reforms, significant policy insights are provided by the research, which suggests increasing the financial capacity, enhancing accountability and transparency mechanisms, and ensuring equal allocation of resources among provincial governments. It can result in efficient and sustainable outcomes of living standards in Pakistan.