MAJOR MACROECONOMIC ISSUES AND ECONOMIC GROWTH OF PAKISTAN

Abstract

In this research we have found out the impact of fiscal deficit, trade volume, unemployment rate and exchange rate on the GDP of Pakistan.  The data was collected from 1981- 2020. We have used Unit root test for checking the stationarity of the variables. Some of the variables were stationary at level and some of them were stationary first difference. Autoregressive Distributed Lag (ARDL) approach was used for the purpose of checking long term and short-term relation between the variables. None of the variables was stationary at second difference fulfilling the assumption of ARDL. The long run results showed that trade volume and exchange rate have positive impact on the GDP growth of Pakistan but as the unemployment decreases GDP grows so it has an inverse relation with the GDP. Fiscal deficit has negative and significant relation with the GDP. By applying the diagnostic tests, we found that all the selected variables were fit for use in the research.