Trade-off between Inflation, Interest and Unemployment Rate of Pakistan: Revisited

Sumera Arshad and Amjad Ali

MPRA Paper from University Library of Munich, Germany

Abstract: This study analyses the interrelationship of unemployment rate, interest rate and inflation rate in Pakistan over the period from 1974 to 2013. Autoregressive Distributed Lag (ARDL) model has been employed to find co-integration among variables of the models. Vector Error-Correction model is utilized for analysing short run dynamics of the models. The results do not provide significance trade-off between unemployment rate and inflation rate. Trade off exists in interest rate analysis over short run with inflation rate and unemployment rate. The empirical results show population growth and exchange rate have negative whereas external debt plays a positive role in determining unemployment rate in Pakistan. Money supply is revealed as major cause of inflation while exchange rate and imports have contributed negatively in inflation. The rate of interest has positive impact on domestic credit to private sector whereas it is negatively related to exchange rate.

Keywords: Inflation Rate; Unemployment Rate; Interest Rate (search for similar items in EconPapers)
JEL-codes: E31 E40 J6 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (106)

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Journal Article: Trade-off between Inflation, Interest and Unemployment Rate of Pakistan: Revisited (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:78101

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