Abstract
Fiscal sustainability has always been a lingering concern for developing countries like Pakistan. This study intends to verify the sustainability hypothesis by estimating a long run relationship between fiscal variables in Pakistan for a period 1976-2016. Dickey and Fuller Generalized Least Square (DF-GLS) and Ng-Perron unit root tests were used to determine the order of integration. Three most significant structural breaks had also been identified by using Bai and Perron test. Further, Fully Modified OLS (FMOLS), Dynamic OLS (DOLS) and Auto-Regressive Distributive Lag (ARDL) cointegration techniques were employed to find the long run relation between public expenditures and revenues. After a long run analysis, the results depicted that fiscal policy was found to be weakly sustainable. Therefore, the present study suggests fiscal reforms to sustain the fiscal policy in the long run.