Impact of Inflation on Economic Growth and Unemployment in Nepal (1990-2018)

Abstract

This study entitled "Impact of Inflation on Economic Growth Rate and Unemployment: Trend Analysis (1990 to 2018)" has been carried out in partial fulfillment for the degree of Master of Arts in Economics. The study analyzes the trend of inflation in Nepal and its impact on economic growth and unemployment. The data for this study have been collected through annual reports of IMF, NRB and MOF, journals, economic survey and related publications. Thus data have been presented in tables, figures, percentage and ratio, correction coefficient and regression line are used to clarify the facts under study. The trend line and diagrams are also useful to justify the objectives of study. The study found, the relationship between inflation and economic growth rate is very much insignificant. Value of correlation coefficient between inflation and economic growth rate is only 0.000154. The linear regression line of economic growth rate with inflation rate is obtained as G = 4.4437 - 0.008597 I. It shows that in 0% inflation rate economic growth rate is 4.4437% and in 1% inflation rate economic growth rate decreases by 0.008597%. The relationship between inflation and unemployment rate is found very much less influential to each other. The correlation ship between these two variables is found 0.000000679. It shows that inflation and unemployment are completely independent to each other. The regression line of unemployment on inflation is U = 1.67436 - 0.008668 I. It shows that in absence of inflation, unemployment rate is 1.67436% but in 1% inflation rate unemployment rate decreases by 0.008668%. It shows that inflation has very less impact on economic growth rate and unemployment rate. In the context of Nepal, inflation, economic growth rate and unemployment rate are independents. v