Article | Open Access | Published: 15 June 2013
Exploring Impact of Macro Economic Variables on GDP of Pakistan
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Abstract:
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 1980 to2013. Research was secondary data-based, and multivariate regression analysis was used to analyze the data. The econometric model used for analysis consisted of GDP as a dependent variable while the independent variables were interest rate, exchange rate, and inflation rate. Data was taken for these variables from the website of the State Bank of Pakistan and World Bank. The individual significance of the variables, overall significance, and goodness of fit of the econometric model was analyzed. The study found that there is a 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 a negative relation with GDP while interest rate possessed positive relation with GDP. Based on results and its analysis it is recommended that the government adopted a tight monetary policy to reduce inflation as the results indicate that inflation has a significant but negative impact on GDP. In the case of developing counties like Pakistan high value of the real exchange rate should be maintained because results show that there is a significant and positive impact of the exchange rate with GDP. The ceiling of interest rate should be removed to boost the economy.
Keywords:
GDP (Gross Domestic Product), Inflation, Rate of Interest and Exchange rate
Publisher:
ILMA UNIVERSITY
Published:
15 June 2013
Issue:
Issue 1 : Volume 9
E-ISSN:
2409-6520
P-ISSN:
2414-8393
This is an open access article distributed under the terms of the Creative Commons Attribution CC BY 4.0 license, which permits any use, distribution, and reproduction of the work without further permission provided the original author(s) and source are credited.