Inflation and Growth Nexus in Pakistan: A Time Series Analysis

Abstract

This study is related to recognize the effect of inflation on economic growth in the case of Pakistan. Inflation is a state when the general price level moves to increase. A large number of people say that if unnecessary money pursues meager goods this state is called inflation. This analysis is comprised of data from 1981 to 2014. Selected variables are Gross Domestic Product growth rate, Inflation, Child labor force, Unemployment, and Gross fixed capital formation. The inflation will work only if the rising price process prevails in the country and increases in wages, devaluation of the currency, an increase in oil prices, and an increase in indirect taxes. This finding fails to provide credibility in the direction of observation that developing countries are confronting a persistent decline in the gross domestic product due to the devaluation of the currency. ARDL technique and unit root test are used to find stationary. There is no single solution to the conflict. So, the Government should accept those measures such as monetary and non-monetary to fight it. These measures can be classified as under monetary measures, Fiscal measures and General measures. Credit rationing put to get a better gross domestic product. Policy commands that Pakistan should adopt an energetic plan for encouraging gross domestic product utilizing exceeding channels.