Evaluating the Dilemma of Inflation, Poverty and Unemployment

Abstract

The main aim of this study is to investigate the existence of long run relationship among poverty, inflation, and unemployment. For the sake of empirical analysis this study employs ARDL approach to find out long run relationships by using data from 1975-2013 from WDI. The reverse of Human development index (HDI) has been used as a proxy of multidimensional poverty. The index has been constructed on the same lines as the HDI is developed by UNDP with the help of four indicators i.e. life expectancy, infant mortality, per capita income, and mean year schooling. Independent variables are unemployment, inflation, and dependency ratio, and population growth, government expenditures on education, trade openness, and remittances. The empirical results suggested the validation of employing ARDL holds, and the existence of long run relationship between poverty, inflation, and unemployment has been found. The results are suggestive that unemployment and inflation both bring about increase in poverty. Further findings of the study indicate that dependency ratio, remittances, and population growth are also having significant impacts on poverty in the long run. Finally these results are not only valid for the long run but they even held in the short run as well.