Role of Macroeconomic Indicators and Strategic Management in Afghanistan's Economic Growth

Abstract

Macroeconomic indicators provide valuable insights into the economic trends and health of a nation. This study focuses on assessing the impact of key macroeconomic indicators—foreign direct investment, inflation, industrial output, exchange rate, and money supply—on the economic development of Afghanistan from 2000 to 2021. Additionally, the study evaluates the effects of trade, interest rates, labor force, and inflation on Afghanistan's GDP. The findings indicate that trade (TR) is statistically significant and has a positive impact on GDP, as it creates better job opportunities, reduces poverty, and enhances economic prospects. Interest rates (IR), while statistically significant, show a negative correlation with GDP. Increased interest rates lead to reduced spending by firms and consumers, subsequently lowering profits, stock prices, and overall GDP. The labor force (LF) is also found to be statistically significant and positively influences GDP, highlighting the essential role of labor in the production of goods and services. Conversely, inflation (IF) is statistically insignificant and negatively impacts GDP. Rising labor and raw material costs drive inflation, leading to higher prices for goods and services, which can dampen consumer spending. This study underscores the critical role of macroeconomic indicators in shaping economic development and provides a comprehensive analysis of their impact on Afghanistan’s economic growth. The results offer valuable insights for policymakers and economists aiming to foster economic stability and growth in Afghanistan.