Impact of Inflation on economic growth: A time series analysis (A Time Series Analysis of Pakistan) Section English Articles

Abstract

      This paper investigates the impact of inflation on economic growth for the period of 1973 to 2022 in Pakistan. This paper used ADF and PP unit root test, for checking the stationarity of data. The result of unit root test indicates that there is mix order of integration, therefore, this study used autoregressive distributed lag model (ARDL) to determine the co-integration among variables. The result shows that in long-run, inflation rate has negative and significant impact on economic growth for the period of 1973 to 2022, highlighting inimical effect of inflation on Pakistan economy. While specific impact of export and unemployment rate on economic growth has been included in this analysis, result shows export and unemployment have insignificant effect on economic growth. Moreover, the short-run result reveals that inflation rate has a negative and significant impact on economic growth. This shows that increase in inflation rate in Pakistan is detrimental to the economy both in the short-run and long-run period of time. On the basis of the descriptive and econometric analysis, it is recommended that the authorities and government should make more effective policies to target and maintain inflation rate at low to prevent its adverse effect which may incite economic growth.