Academic journal article International Review of Management and Business Research

Impact of GDP and Inflation on Unemployment Rate: A Study of Pakistan Economy in 2000-2010

Academic journal article International Review of Management and Business Research

Impact of GDP and Inflation on Unemployment Rate: A Study of Pakistan Economy in 2000-2010

Article excerpt

Introduction

For successive governments in Pakistan poverty stands as a single main challenge like other developing and underdeveloped countries. Presently, governmental and certain non-governmental organization have estimated more than quarter of Pakistani population living under poverty line. According to Human Development Index (HDI) 2009 report, Pakistan, Bangladesh, and India stand at 0.572, 0.543 and 0.612 respectively. This report also shows an uneven distribution of wealth in Pakistan where top 10% of the population earning 27.6% and bottom 10% earning only 4.1% of the income. There are many factors responsible for poverty in Pakistan; although in this study relation between inflation, unemployment and poverty has been studied.

Inflation and unemployment both vary from economy to economy. (Slesnic (1993). Some economies have found high inflations related to higher unemployment. Some economies have found high inflation moderately related to unemployment and others high inflation with low unemployment. Blank, R.M. (1993). Similarly some countries are in the situation where the economy is in moderate to low inflation and moderate to lower unemployment and others are moderate to low inflation but moderate to high unemployment. Therefore inflation exists in different economies differently. Chaudhary, M. and Ahmad, N. (1995).

Therefore inflation in economy exists everywhere and it would be a proper research objective for investigation. The impact of inflation on unemployment would also be critically investigated in the current study. As research student of higher studies the identification of these two variables will provide something insights into the economic problems with a critical look on the issues of inflation and unemployment and their relationship. The research study would be contributive to lay down the main reasons for the stated phenomena and critically draw some imperative statements for the improvement of the current status.

Problems Statement

Inflation, that raises the price level in a country, creates financial problems in raising the prices of commodities, services, and other factors (Rashid and Kernal, 1997). It is, therefore, found that inflation is one of the major reasons of raising the price level of different commodities. The role of inflation in the economies is found to be the cause of decline in the value of money. Therefore, inflation is creating problems in the form of raising the price level and declining the value of money. The raising value of inflation with the passage of time is to be examined in relation to unemployment to determine the phenomenon relationship statistically. The study is planned to examine the changing role of inflation with the passage of time in the economy and its relationship with unemployment.

Objectives of the Study

- To examine the role of inflation in the economy of Pakistan

- To examine the role of GDP in the economy of Pakistan

- To examine the role of unemployment in the economy of Pakistan

- To examine the influencing role of inflation in relationship to GDP

- To examine the influencing role of inflation in relationship to unemployment

Literature Review

Changes in the unemployment rate are important to explain variation in the conventional earnings or income as the rate of unemployment determines the basis of consumptions. There can be differences over the fixed ratio of unemployment but it is widely believed that the problem of unemployment in Pakistan has increased during the decade of 1990s. According to Hussain (2001) the caloric-based unemployment has, in fact, doubled from 17.4% in 1987-88 to 32.6% in 1998-99. Similar outcome have been observed on approach based about central needs and unemployment and opportunity trends. Social indicators such as literacy rate, infant mortality rate, population growth rate, access to water, nutritional items etc., all verify the above results that Unemployment weak social and human development are not only at a high level in the country but also have deteriorated over the last decade of the century. …

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