THE EFFECTS OF ECONOMIC GROWTH, INFLATION RATE, TRADE OPENNESS, AND UNEMPLOYMENT RATE ON POVERTY: PROSPECTS AND CHALLENGES IN PAKISTAN

Abstract

Poverty is a prevailing issue that is now being deliberated and analysed in numerous industrialised and developing nations, including Pakistan. The present study aims to investigate the primary factors that contribute to poverty in the context of Pakistan. This study employed time series data for the goal at hand. In order to assess the stationarity of the data Unit root tests, specifically the Augmented Dickey-Fuller and Phillips-Perron tests, was utilised in order to ascertain the level of integration. In addition, a Bound test was undertaken to assess the long-term relationship. The outcomes of the Bound test revealed that long-run relationship exist between dependent and independent variables in the presence of poverty. The study employed the Autoregressive Distributed Lag (ARDL) modelling approach to examine the short and long-term effects of poverty variables. Furthermore, the Johansen co-integration test shows that long-term relationship between the endogenous and exogenous variables prevailed. A series of diagnostic tests was conducted to assess the quality and appropriateness of the model. In conclusion, the use of forecast error variance decomposition and impulse response function was employed to provide support and enhance the analysis of the ARDL model.