Exploring the Impact of Macro & Socio Economic Variables on GDP of Pakistan and Psychological Impacts of Inflation on Poor Families

Abstract

Purpose: This paper explores the impact of macroeconomic variables like interest rate, real exchange rate and role of inflation in GDP of Pakistan. This paper aspires to shed light on the factors all the way during this difficulty occurs for our financial markets and economy. And it observes the socio-economic issue force of inflation on poor families. To call attention to the socio-economic and psychological collision of inflation on poor families.

Theoretical Framework: Researchers explained this study by analyzing the financial system & its performance exaggerated by macroeconomic factor such as inflation.

Findings: The study brings to light that interest rate, exchange rate, and inflation have great impact on GDP. Exchange rate has positive relationship with GDP while inflation and interest rate are negatively related with GDP. Researchers talk about the causes of inflation cost pull and demand pull inflation and how researchers fight the inflation from our economy. Researchers discuss implications of our conclusion for theory and practice.

Practical implications: On the bases of results and its examination it is not compulsory that Government accepts extended monetary policy in order to reduce inflation, as the  results point out that inflation has a negative effect on GDP. In case of developing countries like Pakistan, high value of real exchange rate should be upheld because results demonstrate that there is significant and positive impact of exchange rate on GDP. Upper limit for rate of interest should be disconnected in order to make the economy better.

Keywords: GDP (Gross Domestic Product), Inflation, Rate of Interest and Exchange rate. Financial markets