Macroeconomic Instability and Its Impact on Gross Domestic Product: An Empirical Analysis of Pakistan

Amjad Ali and Hafeez Ur Rehman

MPRA Paper from University Library of Munich, Germany

Abstract: This study tries to answer the question, “has macroeconomic instability detrimental impact on gross domestic product of Pakistan over the period of 1980 to 2012?” For reviewing macroeconomic instability a comprehensive macroeconomic instability index is constructed by incorporating inflation rate, unemployment rate, trade deficit and budget deficit. Autoregressive Distributed Lag (ARDL) model has been used for examining the cointegration among the variables of the models and Vector Error-Correction model is used for short-run dynamics of the models. For investigating the causal relationship among the variables of the model Granger causality test has been applied. The empirical results of the study confirm the existence of cointegration between macroeconomic instability and gross domestic product in Pakistan. The results of the study show that macroeconomic instability has deep rooted and detrimental impact on gross domestic product of Pakistan. Hence, for achieving desired level of gross domestic product, Pakistan should make macroeconomic environment stable.

Keywords: Macroeconomic instability; Gross domestic product; Financial development; Secondary education; Foreign direct investment (search for similar items in EconPapers)
JEL-codes: E22 F63 G32 I21 P24 (search for similar items in EconPapers)
Date: 2015, Revised 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (143)

Published in Pakistan Economic and Soical Review 2.53(2015): pp. 285-316

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/82496/1/MPRA_paper_82496.pdf original version (application/pdf)

Related works:
Working Paper: Macroeconomic Instability and Its Impact on Gross Domestic Product: An Empirical Analysis of Pakistan (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:82496

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().