Estimation and forecasting of the inflation, interest,literacy and unemployment rate of Pakistan using nonlinear regression models

A A Ghoto

doi:10.17485/ijst/v14i3.1812

Abstract

Background/Objectives: To analyze and investigate the relationships for the inflation rate, interest rate, literacy rate and unemployment rate of Pakistan with a high level of accuracy. Methods/Statistical analysis: Method of nonlinear least squares have been adopted to fit the nonlinear regression models to estimate the present and future trends for the inflation rate, interest rate, literacy rate and unemployment rate of Pakistan based on the data from the year 2000 to 2019. Various nonlinear regression models were tested by changing their degree and number of coefficients. For each trial, the goodness of fit was set at a 95% confidence level. The best regression models were selected on basis of goodness of fit, the correlation with the present data and the logical trend of future forecasts. Findings: The proposed nonlinear regression models are quite different from the conventional linear and nonlinear polynomial regression models. The fitted and forecasting graphs show very realistic results that can be used by policymakers with good accuracy. Novelty/Applications: Since the periodic abrupt changes in the quantitative response variables like inflation rate, interest rate, literacy rate and the unemployment rate of Pakistan have been smoothly incorporated; therefore, the government or other socio-economic practitioners may use the results for future planning and management of the resources depending upon these factors. Keywords: Inflation rate; literacy rate; interest rate; unemployment rate; nonlinear regression; forecasting

Highlights

The economist and policymakers are often keen to know the trends and correlations of the inflation rate, interest rate, literacy rate and unemployment rate that may help them to analyze the economic growth of a country
The proposed model estimates that the interest rate in Pakistan is expected to increase between 2023 and 2024 that may remain in the range of about 4% in the 10 years
It was found that the sum of sines model with five general terms, the Fourier model with two general terms, the sum of sines model with two general terms and a mix of the Gaussian model and other custom expressions are the finest types of models for the inflation rate, interest rate, literacy rate and the unemployment rate of Pakistan respectively

Summary

Introduction

The economist and policymakers are often keen to know the trends and correlations of the inflation rate, interest rate, literacy rate and unemployment rate that may help them to analyze the economic growth of a country. Inflation refers to a situation where the supply of money exceeds its demand or prices of commodities increase steadily. The variation in the availability of goods and services used as inputs in the production affects the final price of goods and services in the economy, changing the rate of inflation[2]. The interest rate is considered to be an important financial factor that affects the decisions of policymakers, professional investors and consumers; it helps to understand the financial progress and changes in economic policy [5,6]. Unemployment is a worldwide problem and usually, the countries with high unemployment rates suffer from various social, political, and economical instabilities that lead to poverty, health diseases and high crime rates[9]

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Conclusion