Essay on Impact of GDP and Inflation on Unemployment
The study conducted by Umair and Ullah (2013) focuses on the revelation of the possible interdependence between the inflation and unemployment rate and their overall impact on the economic development of Pakistan. The authors suggest the hypothesis of the research which they attempt to prove in the course of their study, which is as follows (Umair & Ullah, 2013):
H1: Inflation significantly influences the GDP rate of the Pakistani economy
H2: Inflation significantly influences the GDP rate of the Pakistani economy on the unemployment of Pakistan economy.
Furthermore, the researchers present the research design of their study which shows how the researchers are planning to conduct their study and what methodology they will use in the course of their study. The milestone of the research is the experiential method which involves the data analysis based on the analysis of statistical information available to the researchers from open sources. The researchers focus on the study of the development of the unemployment and inflation rate in 2000-2010. The decision of the researchers to study the change of the unemployment and inflation rate within a decade allows them to conduct the extensive study and the period studied by the researchers is sufficient for the study of economic performance in the mid-term perspective.
At the same time, the ten years period is apparently in sufficient to obtain reliable financial and economic data because ten years period does not show changes and transformations that occur to the economy in a long-run. In fact, the ten years period can show the economic development and respective changes in the inflation and unemployment rate but these changes are typical for one cycle of the economic development characterized by the rise and fall of the economy.
In this regard, the period chosen by the researchers is quite accurate because 2000 is the period, when the global economic have already started to grow after the profound financial crisis in South-East Asia in 1998. The ten years period marked the rise of the development of the global economy which peaked in the mid-2005 and the inflation and unemployment rate drawn by the researchers in the study prove the high level of the economic development in target countries involved in the study.
At the same time, the researchers could study the steep decline of the global economy in 2007-2008, when the economic recession in the US has struck causing the profound global financial crisis. The researchers find out in their study how that crisis has influenced the inflation and unemployment rate or has been triggered by the growing inflation and unemployment.
Furthermore, the researchers focus on the study of the inflation and unemployment rates and their changes in Pakistan only. Therefore, the researchers narrows the scope of their research to one country only that makes it difficult to trace how the inflation and unemployment rate could have influenced other countries in the time studied by the researchers.
The experiential approach is quite efficient and based on the statistical information available to the researchers. In this regard, the use of the statistical information shows clearly changes that the researchers uncover in the course of the study.
At the same time, the researchers do not provide the detailed description and analysis of limitations of their study and its methodology.
To test the accuracy and reliability of their conclusions, the authors of the study use the null hypothesis. They try rejecting hypothesis made in the course of the study and eventually conclude that inflation does not have a significant impact but GDP and unemployment as the major macroeconomic factors that influence the economic development of the country that is being under the study, i.e. Pakistan.
The researchers focused on the use of the inflation and unemployment rates as independent variables, involving related issues, such as the economic situation in global markets as dependent variables. In such a way, the researchers attempted to arrive to the reasonable conclusion on the accuracy of their findings and made their conclusion on the ground of the relevant information.
On the other hand, it is still possible to distinguish certain limitations of the study, such as the limited timeline of the study and only one country involved in the study. The limited timeline of the study influences consistently outcomes of the study. At this point, it is worth mentioning that the average business or economic cycle takes seven – eleven years. This is why the study basically shows changes in the unemployment and inflation rate in the course of one economic cycle only. However, the researchers do not exactly show the evolution of the economic cycle from its beginning to the end because the beginning of the new economic cycle after the financial crisis in South East Asia dates back rather to 1999 than to 2000 and the economic cycle ends by 2008-2009, when the new global financial crisis has struck. Nevertheless, the timeline allows obtaining the basic information on the evolution of the unemployment and inflation rate during one economic cycle. However, the researchers underestimate or neglect the fact that there are long waves of the economic development which may take decades and smaller crisis that occur with different frequency of seven – eleven years at average. Therefore, the longer timeline of the study could help to obtain more accurate information. In addition, the authors could try to focus on the development of the correlation between different stages in the economic development of Pakistan within the economic cycle and the inflation and unemployment rate. In such a way, the researchers would provide the information on the correlation between the economic development in general, on the one hand, and the inflation and unemployment rate, on the other.
Furthermore, the study involves Pakistan only that is another limitation of the study because the involvement of different countries to obtain the information on the change and interdependence of inflation and unemployment rate could help the researchers to conduct more extensive study, especially taking into consideration the level of the integration of the global economy today.
Thus, the study conducted by Umair and Ullah reveal the impact of the unemployment and inflation rate on each other and the overall economic development of Pakistan. The study involves the use of the experiential approach and is based on the statistical analysis, while findings and results of the study are tested with the help of the null hypothesis. However, the study still has some limitations, such as the relatively short timeline and only one country involved in the study.
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