Smart Governance: Analysing GDP Growth and Key Economic Indicators in Pakistan

Mahnoor Mehmood and Xu Hui

World Economics, 2025, vol. 26, issue 3, 128-149

Abstract: The study integrates human capital theory, Okun's Law, and capital accumulation, using econometric tools such as the Augmented Dickey-Fuller (ADF) test, Autoregressive Distributed Lag (ARDL) modelling, and Error Correction Model (ECM) to analyse the unemployment-GDP growth relationship in Pakistan. GDP growth, labour force participation, and fixed capital formation are stationary at the first difference, while unemployment is stationary at the level, indicating different integration properties among the variables. In the short run, unemployment negatively affects GDP, whereas labour force participation and fixed capital formation have positive effects; in the long run, reducing unemployment is critical for sustainable GDP growth. The study advocates for policies targeting unemployment reduction, increased labour market participation, and enhanced capital formation to support resilient economic development in Pakistan.

Date: 2025
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