Trade Off Between Inflation And Unemployment In Pakistan Pdf

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Trade-off between Inflation, Interest and Unemployment Rate of Pakistan: Revisited

Skip to search form Skip to main content You are currently offline. Some features of the site may not work correctly. Mahmood and Rabia Bokhari and M. Mahmood , Rabia Bokhari , M. Aslam Published Economics. Pakistan is one of the developing countries in Asia.

The common measure of inflation is the inflation rate , the annualized percentage change in a general price index , usually the consumer price index , over time. Economists believe that very high rates of inflation and hyperinflation are harmful, and are caused by an excessive growth of the money supply. Low or moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities. Inflation affects economies in various positive and negative ways. The negative effects of inflation include an increase in the opportunity cost of holding money, uncertainty over future inflation which may discourage investment and savings, and if inflation were rapid enough, shortages of goods as consumers begin hoarding out of concern that prices will increase in the future. Positive effects include reducing unemployment due to nominal wage rigidity , [12] allowing the central bank more leeway in carrying out monetary policy , encouraging loans and investment instead of money hoarding, and avoiding the inefficiencies associated with deflation. Today, most economists favor a low and steady rate of inflation.

Inflation-Unemployment Trade Off: Evidence from Pakistan

However, at the same time it has become apparent that it may not be possible to achieve or even closely approximate all these policy targets simultaneously. More particularly, the reconciliation of full employment with price stability has emerged as an extremely troublesome task for macroeconomic policy in many countries. Judging from past experience, policymakers are faced with a trade-off dilemma: attempts to reduce the unemployment rate by increasing the level of aggregate demand usually lead to higher rates of inflation, while attempts to reduce the rate of increase of prices and wages usually lead to higher rates of unemployment. The primary purpose of this paper is to provide a review of the recent post empirical literature on the trade-off between unemployment and inflation for a number of countries. Ideally, such a review should indicate if, when, and where such a trade-off exists and, if it exists, what its important properties are. While this review has been directed at these questions, it is only fair to warn the reader that only partial answers have been obtained. To keep the survey in manageable proportion, a number of restrictions have been placed on its scope.

As the access to this document is restricted, you may want to search for a different version of it. More about this item Keywords Pakistan economy ; inflation ; labour ; poverty ; All these keywords. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jge:journl See general information about how to correct material in RePEc. For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr J K Sachdeva.

This study analyses the interrelationship of unemployment rate, interest rate and inflation rate in Pakistan over the period from to Vector Error-Correction model is utilized for analysing short run dynamics of the models. The results do not provide significance trade-off between unemployment rate and inflation rate. Trade off exists in interest rate analysis over short run with inflation rate and unemployment rate. The empirical results show population growth and exchange rate have negative whereas external debt plays a positive role in determining unemployment rate in Pakistan.

Trade-off between Inflation, Interest and Unemployment Rate of Pakistan: Revisited

Unemployment , according to the OECD Organisation for Economic Co-operation and Development , is persons above a specified age usually 15 [2] not being in paid employment or self-employment but currently available for work during the reference period. Unemployment is measured by the unemployment rate, which is the number of people who are unemployed as a percentage of the labour force the total number of people employed added to those unemployed. Unemployment and the status of the economy can be influenced by a country through, for example, fiscal policy.

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Show all documents Trade off between Inflation, Interest and Unemployment Rate of Pakistan: Revisited Inflation rate , interest rate and unemployment rate are considered main indicators of macroeconomic situations. Normally, inflation refers to a situation where supply of money exceeds to its demand or prices of commodities rise persistently.

IMF Staff papers : Volume 19 No. 3

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Inflation-Unemployment Trade Off: Evidence from Pakistan

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3 Response
  1. OdГ­n B.

    The Phillips curve shows the inverse relationship between inflation and unemployment: as unemployment decreases, inflation increases.

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