Impact of Inflation on Economic Growth in Pakistan

Abstract

This study examines the relation between inflation and economic growth of Pakistan and to explore if there is a long or short- term relationship between the both. For this purpose, the study used annual data of the period between 1973 to 2014 collected from the World Bank for Pakistan. In this study, GDP is taken as dependent variable, inflation as an independent variable and population as a control variable. To check relationship among the variables, different econometric techniques such as augmented dickey fuller and Philips Perron tests of unit root were applied to check whether the data is stationary or nonstationary and to find the order of integration of the variables. Also, an ARDL approach of co-integration on the variables of GDP, inflation and population was used in order to check the relation among variables. The obtained results show a long-run relationship between inflation and economic growth in Pakistan.