Impact of Inflation on Economic Growth in Sri Lanka

  • W. Madurapperuma M
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Abstract

This paper empirically investigates the effects of unemployment and inflation on economic growth in Sri Lanka for the period of 1990 - 2016. To achieve this objective, secondary data were taken from World Bank database for the above period. To test stationary, Augmented Dickey Fuller Test was used. In addition to that, Long-run and short-run elasticities of the variables were examined using the Autoregressive Distributed Lag (ARDL) bounds test co-integration method proposed by Pesaran et al. (2001). Results of the unit root test indicate that GDP growth rate and inflation have stationary but unemployment has unit root problem or non- stationary at level. But, when this variable is tested at first difference then the problem of unit root has disappeared and hence it has become stationary at first difference. The results of the ARDL bounds test indicate that there is a long-run relationship among the variables. The estimated empirical results showed that Unemployment and GDP growth rate have a strong negative significant relationship whereas Inflation and GDP growth rate have a positive significant relationship in the long-run

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APA

W. Madurapperuma, M. (2016). Impact of Inflation on Economic Growth in Sri Lanka. Journal of World Economic Research, 5(1), 1. https://doi.org/10.11648/j.jwer.20160501.11

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