Fiscal Determinants of Income Velocity of Money in South Asian Countries : A Panel Data Analysis

The objective of the study is to examine the fiscal determinants of Income velocity of Money for some selected South Asian Countries. For that purpose, time series data from 1991 to 2012 is combined with cross sections of 5 South Asian Countries like Bangladesh, India, Nepal, Pakistan and Sri Lanka. By formulating Panel of this region and examining order of integration 1 or I (1), the study applies Johansen Fisher Panel Co integration test. Panel co integrated estimates are calculated using Fully Modified least squares, Dynamic least squares and Canonical Co integrating regression. The findings indicate that income velocity of money will increase due to higher government expenditure and worker remittances in the long run. On the other side, government revenue, population and GDP deflator are cause of lowering income velocity of money in South Asian Countries. Results suggest that there should be increase in subsidies to offset the effect of tax rate. Brain drain should be avoided through organizing internally own industries. Prices should be increased but with increase in income so that purchasing power remains unchanged