Exploring Impact of Macro Economic Variables on GDP of Pakistan

Sidrat Jillani, Farooq e Azam Cheema, Muhammad Asim

Abstract


Purpose-This research work explores the impact of macroeconomic variables like inflation, real exchange rate and interest rate on GDP of Pakistan in the light of 32 years data, for the period of 1980 to2013. Methodology/sample-Research was secondary data based, and multivariate regression analysis was used to analyze the data. Econometric model used for analysis consisted of GDP as dependent variable while the independent variables were interest rate, exchange rate and inflation rate. Data was taken for these variables from the website of State Bank of Pakistan and World Bank. Individual significance of the variables, overall significance and goodness of fit of the econometric model was analysed. Findings-The study found that there is significant impact of inflation, interest rate and exchange rate on GDP. As far as the signs of co-efficient are concerned, inflation and interest rate had negative relation with GDP while interest rate possessed positive relation with GDP. Practical implications-Based on results and its analysis it is recommended that Government adopted tight monetary policy to reduce inflation as the results indicate that inflation has significant but negative impact on GDP. In case of developing counties like Pakistan high value of real exchange rate should be maintained because results show that there is significant and positive impact of exchange rate with GDP. Ceiling of interest rate should be removed in order to boost the economy.

Keywords :GDP (Gross Domestic Product), Inflation, Rate of Interest and Exchange rate.


Full Text:

PDF

References


Barro, R. J. (1995) Inflation and Economic Growth, Bank of England Quarterly Bulletin 35: 166-176.

Bhalla, Surjit S. (2007) Second Among Equals: The Middle Class Kingdoms of India and China. Washington DC: Peterson Institute of International Economics.

Blejer, M. (2000) Inflation Targetting in Practice: Strategic and operational issues and application to emerging market economies. International Monetary Fund.

Bruno, T. & Easterly, W. (1998) Inflation crises and long-run growth. Journal of Monetary Economics , 3-26.

Cecchetti, S. G. (2000) Making Monetary Policy: Objectives and Rules. Oxford Review of Economic Policy 16:4, 43-59.

De Gregorio, Jose. & Guidotti, P. E. (1995) financial development and economic growth. World Development, Vol. 23(3), pages 433-448.

Dornbush, R. (1993) Stabilization, Debt and Reform: Policy Analysis for

Developing Countries. New York: Harvester Wheatsheaf .

Friedman, M. (1963) Inflation: Causes and Consequences. Proquest/Csa

Journal Division.

Fry, M. (1995) Money, Interest, and Banking in Economic Development. Johns Baltimore & London: Hopkins University Press.

Galbis, V. (1995) Financial Sector Reforms in Eight Countries: Issues and

Results. IMF Working Paper No. 95/141 .

Gala, P. (2002) Real Exchange Rate Levels and Economic Development:

Theoretical Analysis and Empirical Evidence, Sao Paulo Business Administration School, Getulio Vargas Foundation, 200.

Goldstein, M. (2002). Managed Floating Plus. Washington DC: Institute of

International Economics

Hooper, Peter and Mann, C. (1989) The Emergence And Persistence of the U.S External Imbalance: 1980-1987, Princeton Studies in International finance. New Jersey: Princeton University.

Levy-Yeyati, E. and Sturzenegger, F. (2002) To Float or to Fix: Evidence on the Impact of Exchange Rate Regimes on Growth. American Economic Review, 12(2), p.1-49.

Mallik, G. and Chowdhury, A. (2001). Inflation and Economic Growth: Evidence from four South Asian Countries. Asia-Pacific Development journal, 13.

Obamuyi, T. M. (2009) An investigation of the relationship between interest rates and economic growth in Nigeria, 1970 - 2006 , Journal of Economics and International Finance Vol. 1(4), pp. 093-098.

Qayyum, A. (2006) Money, Inflation, and Growth in Pakistan. The Pakistan Development Review, No.2: pp. 203-212.

Rodrik, D. (2008) The Real Exchange Rate and Economic Growth. Harvard

University, MA 02138.

Smyth, D. J. (1992) Inflation and the Growth Rate in the United States. Natural Output. Applied Economics 24: 567-570.

Smyth, D. J. (1994) Inflation and Growth, Journal of Macroeconomics 16:

-270.

Smyth, D. J. (1995) Inflation and Total Factor Productivity in Germany,

Weltwirtschaftliches Archiv, 131: 403-405.


Refbacks

  • There are currently no refbacks.




IBT- Journal of Business Studies by ILMA University
is licensed under a Creative Commons Attribution 4.0 International License.
Based on a work at http://jms.ilmauniversity.edu.pk/index.php/jbs/index.
Permissions beyond the scope of this license may be available at http://ibtjbs.ilmauniversity.edu.pk/ 

Copyright ILMA University 2020. All right reserved.

The articles that are published in the journals are distributed under CC BY license. Users can distribute, remix, tweak, and build upon our articles, even commercially, as long as they are credited for the original creation. License Creative Commons.