Effect of unemployment and inflation on economic growth: A case of developing countries


Aim: This research article aims to assess the effect of unemployment and inflation on the economic growth while drawing the evidence from the developing countries.

Methodology: To conduct the research, the quantitative secondary data was taken, and the data was collected from the ten developing countries from 2001 to 2020. The STATA software was used, which provides the results of the OLS regression along with the testing of autocorrelation and heteroskedasticity issues. Apart from the OLS regression, the article also presents the results of the descriptive analysis and the correlation analysis.


The critical indicators that show the country’s economic performance are unemployment, inflation and economic growth. Identifying the relationship between these elements is necessary when making and applying economic policies. Inflation and unemployment have become significant issues in developing countries (Baharumshah, Slesman & Wohar, 2016). It is found from the research of Cantore, Calì & te Velde (2016) that poor working conditions and low wages in private sectors and large public sectors result in a high inflation rate. Inflation and unemployment are intricately linked with the economic development of countries. Inflation and unemployment are the major issues that negatively impact each state’s economic and social conditions. These factors are the central cause of poverty in developing countries. In past decades different factors of economic growth were identified. However, scholars considered two factors: inflation and unemployment and their adverse impact, as these issues are highly found in various developing countries (Dastidar, 2017).

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Ademola, A., & Badiru, A. (2016). The impact of unemployment and inflation on economic growth in Nigeria (1981–2014). International Journal of Business and Economic Sciences Applied Research9(1).

Baharumshah, A. Z., Slesman, L., & Wohar, M. E. (2016). Inflation, inflation uncertainty, and economic growth in emerging and developing countries: Panel data evidence. Economic Systems40(4), 638-657. https://doi.org/10.1016/j.ecosys.2016.02.009

Baum, C. F., & Lewbel, A. (2019). Advice on using heteroskedasticity-based identification. The Stata Journal19(4), 757-767.

Betcherman, G. (2015). Labor market regulations: What do we know about their impacts in developing countries?. The World Bank Research Observer30(1), 124-153.https://doi.org/10.1093/wbro/lku005

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