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# Mubarik 2005 also estimated similar results for

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GDPG is less sensitive to change in investment growth but has positive impact on GDPG. Mubarik (2005) also estimated similar results for investment growth. A hundred percent change in investment growth brings just only 5.9 percent change in GDPG. Labor force participation rate (LFPR) has higher magnitude of sensitivity than investment growth rate; both the variables have same level of significance. The co- efficient of LFPR explains that about 10 percent change in labor force participation rate has about 5.8 percent positive impact on GDP growth. Another explanatory variable, the log of population in millions is included in the model to see its impact on GDPG. This variable brought highly significant result in the model as per expectations. In the study log of population in million has been taken just to rescale the variable. The result explains that level of population in Pakistan has very significant and sensitive relation with GDPG. About 1 percentage point increase in the population cause to decreases the GDP growth by 2.78 percentage points. This result is also significant at 1 percent level. This result is in consistent with Sarel (1996) and contradicts with Mubarik (2005) and Hussain (2005). Now another explanatory variable (INF7) is introduced in the model (Equation2) to analyze the impact of inflation on economic growth. In order to find an optimal and feasible threshold level of inflation for growth, we have taken this dummy variable of inflation less than or equal to 7 percent levels of inflation. The positive impact of this variable has been assumed on the growth of GDP. It is also assumed that the sum of squared residuals on this level of inflation is minimized in this estimated equation. INF7 is a dummy variable which states the condition ‘1’ for inflation below or equal to 7 percent level and ‘0’ for the condition when inflation in the economy exceeds the 7 percent level. The results of the econometric equation 2 are described in table 3 which implies that all other explanatory variables respond in the same manner as in equation 1, except the CINF. If we consider this level of inflation as a threshold for the economy, our results reveal the fact that up-to a certain level (7 percent in this model), inflation causes GDP growth to increase in the economy. This result is found statistically insignificant but the positive co-efficient shows its positive association with GDPG. The value of R 2 is also increased from 0.33 to 0.35, but the negative impact of CINF has not been found significant in the whole time-series.

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62 Pakistan Journal of Social Sciences Vol. 31, No. 1 VIII. Conclusion and Policy Recommendations This study has been an attempt to examine the inflationary situation in Pakistan with special focus on its impact on GDP growth. The second object is to re-examine the existence of inflation growth relationship in the economy of Pakistan. Our focus is on the basic question of whether the negative inflation-growth relationship exists in the economy or the situation is something else? The analysis has been made on the basis of annual time-series data for the period 1972-73 to 2009-10. This study employs simple
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• Summer '17
• ms lau

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