Impact of Inflation on Economic Growth in Pakistan
ABSTRACT:The main objective of this study is to re-examine the existence of an inflation-growth relationship in the Pakistani economy and empirically analyze the impact of inflation on the GDP growth of the economy. It is also a matter of investigating whether it encourages or hurts economic growth in a uniform way or behaves differently at different levels. The analysis is performed using the ordinary least squares (OLS) method. It has been found that there is a negative and significant relationship between inflation and growth in the economy of Pakistan. The results of the study show that prevailing inflation is harmful to the GDP growth of the economy after a certain threshold level. Based on descriptive and econometric analysis, we may suggest policy makers and State Bank of Pakistan to keep inflation below 7% level and keep it stable. So that it may exert its positive effects on the economic growth of the economy.