INVESTIGATE THE IMPACT OF INFLATION ON POVERTY; EVIDENCE FROM PAKISTAN ECONOMY

Abstract

The main aim of the study is to investigate the effect of the inflation rate on the poverty level in Pakistan. This study used the data from 1981 to 2023 and as per data behavior of the data this study used ARDL techniques for estimation. This study found that the inflation rate has a positive and significant effect on the poverty level in the long run, but has an insignificant impact on the poverty level in the short run. However, government expenditure and economic growth have a negative and significant impact on the poverty level in the long run but have an insignificant effect on the poverty level in the short run. Furthermore, the FDI negatively and significantly affects the poverty level in the long and short run. Therefore, this study concluded that the inflation rate influences the poverty level, which means that a reduction in the inflation rate will reduce the poverty level significantly. This study recommended that the changes in the inflation rate because a relatively higher impact on poor people at the national level, urban, and rural relative to non-poor ones. Moreover, the government should incentivize manufacturers to expand local output, which will lower prices. Furthermore, Pakistan's government should work to alleviate poverty by developing and executing poverty-reduction programs such as social security, which lower inflation and unemployment rates and contribute to economic growth.  

Keywords:

Poverty,  Inflation, GDP, Unemployment, Augmented Dickey-Fuller test, OLS regression.