MACROECONOMIC FALL OUTS OF ECONOMIC UNCERTAINTY: ARE THE RESULTS SAME ON ECONOMIC GROWTH, POVERTY, AND UNEMPLOYMENT OF PAKISTAN?
Keywords:
Economic Uncertainty, GDP Growth, Poverty, Unemployment, PakistanAbstract
Purpose: This study is initiated to inquire into the impact of economic uncertainty on the key macroeconomic indicators for instance GDP growth, poverty, and unemployment of Pakistan. For the analysis, the time series data was used from 1972 to 2024.
Methodology: For the purpose of regression analyses, Autoregressive Distributed Lag (ARDL) technique is used. Also, Granger Causality test is incorporated to observe causality between the selected variables.
Novelty: This study is novel since it addresses the interconnected macroeconomic issues in varied framework. This research explores the dynamic relationship of these macroeconomic variables against economic uncertainty.
Findings: The results identify long-term relationship between economic uncertainty and these macroeconomic variables. The findings show that GDP growth and economic uncertainty are negatively related. However, poverty and unemployment are traced as increasing at the back of economic uncertainty in both time horizons.
Implications: The findings highlight persistent challenge on Pakistan to bring policy reforms to mitigate the adverse effects of economic uncertainty.
References
Ahmed, A., Granberg, M., & Troster, V. (2020). Asymmetric dynamics between uncertainty and unemployment flows in the United States (LiU Working Papers in Economics No. 7). Department of Management and Engineering-Division of Economics, Linkoping University, Linkoping, Sweden.
Ahir, H., Bloom, N., & Furceri, D. (2022). The world uncertainty index (NBER Working Paper No. 29763). National Bureau of Economic Research, Massachusetts Avenue, Cambridge.
Andaloussi, M. B., & Maggi, C. (2023). World economic outlook shows economies facing high uncertainty. International Monetary Fund. Retried from: https://www.imf.org/en/Blogs/Articles/2023/04/19/world-economic-outlook-shows-economies-facing-high-uncertainty
Baker, S. R., Bloom, N., & Davis, S. J. (2016). Measuring economic policy uncertainty. The Quarterly Journal of Economics, 131(4), 1593-1636.
Bannigidadmath, D., Ridhwan, M. H. A., & Indawan, F. (2024). Global uncertainty and economic growth- Evidence from pandemic periods. Emerging Markets, Finance and Trade, 60(2), 347-357.
Bernanke, B. S. (1983). Irreversibility, uncertainty, and cyclical investment. Quarterly Journal of Economics, 98(1), 85-106.
Bicchal, M., & Durai, S. R. S. (2020). Assessing macroeconomic uncertainties for an emerging economy (ADBI Working Paper Series No. 1124). Asian Development Bank, Tokyo, Japan.
Bloom, N. (2009). The impact of uncertainty shocks. Econometrica, 77(3), 63-685.
Bowley, A. L. (1915). The nature and purpose of the measurement of social phenomena. London, UK: P.S. KING and SON, Ltd.
Caggiano, G., Castelnuovo, E., & Figueres, J. M. (2017). Economic policy uncertainty and unemployment in the United States: A nonlinear approach, Economics Letters, 151(2017, 31–34.
Caldara, D. Fuentes-Albero, C., Gilchrist, S., & Zakrajsek, E. (2014). The macroeconomic impact of financial and uncertainty shock. European Economic Review, 88, 185-207.
Cepni, O., Guney, I. E., & Swanson, N. R. (2020). Forecasting and nowcasting emerging market GDP growth rates: The role of latent global economic policy uncertainty and macroeconomic data surprise factors. Journal of Forecasting, 39(1), 18-36.
Chen, X., Sun, X., & Wang, J. (2019). Dynamic spillover effect between oil prices and economic policy uncertainty in BRIC countries: A wavelet-based approach. Emerging Markets Finance & Trade, 55(12), 2703-2717.
Choi, S., & Loungani, P. (2015). Uncertainty and unemployment: the effects of aggregate and sectoral channels. Journal of Macroeconomics, 46, 344-358.
Dibiasi, A., & Sarferaz, S. (2023). Measuring macroeconomic uncertainty: A cross-country analysis. European Economic Review, 153, 1-30.
Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74(366a), 427–431.
Dickey, D. A., & Fuller, W. A. (1981). Likelihood ratio statistics for autoregressive time series with a unit root, Econometrica, 49, 1057-1072.
Ercolani, V., & Natoli, F. (2020). Forecasting US recession: The role of economic uncertainty. Economic Letters, 193(2020), 1-5.
Fang, L., Chen, B., Yu, H., & Qian, Y. (2018). The importance of global economic policy uncertainty in predicting gold futures market volatility: A GARCH‐MIDAS approach. Journal of Futures Markets, 38(3), 413-422.
Faridi, M. Z., Mehmood, K. A., Azam, A., & Taqi, M. (2019). Fiscal decentralization and economic growth in South Asian countries. Pakistan Journal of Commerce and Social Sciences, 13(20), 529-546.
Ferderer, J. P. (1993). The impact of uncertainty on aggregate investment spending: An empirical analysis. Journal of Money, Credit and Banking, 25(1), 30-48.
Gibson, J., Jiang, Y., & Susantono, B. (2023). Revisiting the role of secondary towns: How different types of urban growth relate to poverty in Indonesia. World Development, 169(2023), 1-15.
Gilchrist, S., Sim, J. W., & Zakrajsek, E. (2014). Uncertainty, financial frictions, and investment dynamics (Working Paper No. 20038). National Bureau of Economic Research, Cambridge, USA.
Golab, A., Bannigidadmath, D. Pham, T. N., & Thuraisamy, K. (2022). Economic policy uncertainty and industry return predictability–Evidence from the UK. International Review of Economics & Finance, 82, 433-447.
Granger, C. W. J. (1969). Investigating causal relations by econometric models and corss-spectral methods. Econometrica, 37(3), 424-438.
He, F., Ma, Y., & Zhang, X. (2020). How does economic policy uncertainty affect corporate innovation–Evidence from China listed companies. International Review of Economics and Finance, 67, 225-239.
Kandoussi, M., & Langot, F. (2022). Uncertainty shocks and unemployment dynamics. Economics Letters, 219(2022), 1-5.
Kebalo, L., & Zouri, S. (2024). Income inequality in developing countries: Fiscal policy’s role amid uncertainty. Journal of Applied Economics, 24(1), 1-23.
Khursheed, M. R., Mehmood, K. A., Hussain, M. N. (2023). Public-private investment sustenance: A glance of education sector of Pakistan. Journal of Development and Social Sciences, 4(4), 381-393.
Liang, C., Ma, F., Wang, L., & Zeng, Q. (2021). The information content of uncertainty indices for natural gas futures volatility forecasting. Journal of Forecast, 40 (7), 1310-1324.
Lilien, D. M. (1982). Sectoral shifts and cyclical unemployment. Journal of Political Economics, 90(4), 777-793.
Liu, N., & Gao, F. (2022). The world uncertainty index and GDP growth rate. Finance Research Letters, 49(2022), 1-5.
Loungani, P., & Choi, S. U. (2015). Uncertainty and unemployment: The effects of aggregate and sectoral channels. Journal of Macroeconomics, 46(2015), 344-358.
Madanizadeh, S. A., & Setayesh, A. (2020). Macroeconomic uncertainty and economic development a cross-country panel data analysis. Retrieved from: https://gsme.sharif.edu/~madanizadeh/Files/Uncertainty.pdf
Mehmood, K. A., Hassan, S., & Azam, A. (2018a). Inward foreign investment and labor throw outs in Pakistan. iPakistan Journal of Social Sciences, 38(1), 23-39
Mehmood, K. A., Faridi, M. Z., & Hassan, S. (2018b). Foreign direct investment and employment downfall: Panel evidence from South Asian economies. Pakistan Journal of Social Sciences, 38(2), 595-609.
Mehmood, K. A., Ilyas, S., Riaz, F., Munir, F., & Aurmaghan, M. (2024). Public-private sector investment collaboration in health sector of Pakistan: Do taxes on producer and government effectiveness matter? Pakistan Islamicus, 4(1), 71-89.
Pesaran, M.H., & Shin, Y. (1995). An autoregressive distributed lag modelling approach to cointegration analysis (Symposium Paper for the Centennial of Ragnar Frisch), Oslo, Norway.
Rehman, A., Cismas, L. M., & Milin, I. A. (2022). “The three evils”: Inflation, poverty and unemployment’s shadow on economic progress-A novel exploration from the asymmetric technique. Sustainability, 14, 1-16.
Romas, F. M. (2019). Uncertainty in ending extreme poverty. Brookings Nonprofit Organization, Washington, D.C. Retrieved from: https://www.brookings.edu/articles/uncertainty-in-ending-extreme-poverty/
Rossi, R., Miescu, M. (2023). Who suffered most from economic uncertainty early in the Covid-19 pandemic? Economics Observatory, Economic and Social Research Council. Retrieved from: https://www.economicsobservatory.com/who-suffered-most-from-economic-uncertainty-early-in-the-covid-19-pandemic
Rowntree, B. S. (1901). Poverty: A study of town life. London, UK: Macmillan.
Scheffel, E. M. (2016). Accounting for the political uncertainty factor. Journal of Applied Econometrics, 31(6), 1048–1064.
Khan, R. S., & Naseem, I. (2024). Evaluating FDI’s influence on employment and economic development in South Asia. International Research Journal of Social Sciences and Humanities, 3(1), 836-850.
Shah, S. Z. A., Shabbir, M. R., & Parveen, S. (2022). The impact of unemployment on economic growth in Pakistan: An empirical investigation. IRASD Journal of Economics, 4(1), 78-87.
Shaheen, R., Yasmin, N., Safdar, N., Yasmin, F., & Khatoon, S. (2021). Education, poverty, and unemployment: A way forward to promote sustainable economic growth in Pakistan. The Journal of Contemporary Issues in Business and Government, 27(6), 74-85.
Shi, Q., Qiu, W., & Fan, Y. (2020). Economic policy uncertainty and the distribution of business operations between parent companies and their subsidiaries. Emerging Markets Finance & Trade, 56(2), 427-456.
Statista (2024). Market insights, global indicators. Available at: https://www.statista.com/outlook/co/socioeconomic-indicators/pakistan#:~:text=The%20unemployment%20rate%20in%20Pakistan,to%2082.66m%20in%202024.
Stockhammar, P., & Osterholm, P. (2016). Effects of US policy uncertainty on Swedish GDP growth. Empirical Econ., 50(2), 443-462.
Theophilopoulou, A. (2022). The impact of macroeconomic uncertainty on inequality: An empirical study for the United Kingdom. Journal of Money, Credit, and Banking, 54(4), 859-884.
Thye, G. L., Kumari, S. S., Lu, Y. S., & Muhairah, S. S. (2021). The impacts of external and internal uncertainties on income inequality in the ASEAN 5 countries. International Journal of Economics & Management, 15(3), 351-375.
Topel, R., & Weiss, L. (1988). Sectoral uncertainty and unemployment. In R. A. Hart (Eds.), Employment, unemployment and labor utilization. Winchester, London, UK: Allen and Unwin.
Townsend, P. (1979). Poverty in the United Kingdom: A Survey of Household Resources and Standards of Living. Middlesex, England: Penguin Books Ltd.
United Nations. (2015). The millennium development goals report. United Nations.
United Nations. (2024). World economic situation and prospects 2024. Department of Economic and Social Affairs, New York City.
United Nations Development Program. (2024). 2024 UNDP trends report: The landscape of development. Strategy & Futures Team, New York City.
Wang, Y., Chen, C. R., & Huang, Y. S. (2014). Economic policy uncertainty and corporate investment: Evidence from China. Pacific Basin Finance Journal, 46(2014), 227-243.
Wen, F., Li, C., Sha, H., Shao, L. (2021). How does economic policy uncertainty affect corporate risk-takings? Evidence from China. Finance Research Letter, 68(4), 1633-1662.
World Bank, (2024). Poverty & equity brief South Asia Pakistan. Available at: https://databankfiles.worldbank.org/public/ddpext_download/poverty/987B9C90-CB9F-4D93-AE8C-750588BF00QA/current/Global_POVEQ_PAK.pdf
World Bank, (2020). Poverty and shared prosperity 2020: Reversals of fortune. Retrieved from: https://www.worldbank.org/en/publication/poverty-and-shared-prosperity-2020
World Economic Forum. (2024). The global risks: Report 2024. 19th Edition. Geneva, Switzerland.
Zeng, Q., Ma., F., Lu, X., & Xu, W. (2022). Policy uncertainty and carbon neutrality: Evidence from China. Finance Research Letter, 47(2022), 1-6.
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2024 PAKISTAN ISLAMICUS (An International Journal of Islamic & Social Sciences)
This work is licensed under a Creative Commons Attribution 4.0 International License.
This work is licensed under a Creative Commons Attribution 4.0 International License.
