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The Nexus Among Economic Growth, Inflation and Unemployment in Bhutan

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  • Ugyen Tenzin

Abstract

In order to understand the dynamics of unemployment in Bhutan at a macro-level, this study has explored the association among economic growth, inflation and unemployment from 1998 to 2016. The autoregressive distributed lag (ARDL) model was applied to estimate the impact of economic growth and inflation on unemployment. The results of this empirical analysis suggest that economic growth had no impact on the reduction of unemployment rate in Bhutan both in the short and in the long run. In fact, as the economic growth increased, so did the unemployment rate. However, inflation had a negative association with unemployment rate in the short run and a positive association in the long run. In other words, an increase in the employment rate led to an increase in the inflation in the short run. Likewise, if inflation is not monitored or controlled, the uncertainty of inflation can lead to lower investment and lower economic growth, thereby causing unemployment to rise in the long run. This study, therefore, recommends policymakers to take into account the employment elasticity with respect to economic output and focus on sectors, which have more absorptive capacity in engaging the young labour market entrants. JEL: B22, C22, E24, E31

Suggested Citation

  • Ugyen Tenzin, 2019. "The Nexus Among Economic Growth, Inflation and Unemployment in Bhutan," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 20(1), pages 94-105, March.
    • Handle: RePEc:sae:soueco:v:20:y:2019:i:1:p:94-105
    DOI: 10.1177/1391561418822204
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    References listed on IDEAS

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    Cited by:

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    2. Vijay Victor & Joshy Joseph Karakunnel & Swetha Loganathan & Daniel Francois Meyer, 2021. "From a Recession to the COVID-19 Pandemic: Inflation–Unemployment Comparison between the UK and India," Economies, MDPI, vol. 9(2), pages 1-19, May.
    3. Arjun Kumar Dahal & Prem Bahadur Budhathoki & Ganesh Bhattarai, 2024. "Nexus between Unemployment, Income Inequality, Political Stability, and Economic Growth: An Empirical Study of the Nepalese Economy," Valahian Journal of Economic Studies, Sciendo, vol. 15(1), pages 1-14.
    4. Alemu Haile, Minyahil & Daba Megerssa, Girma, 2020. "Testing The Stability Of Tourism-Led Growth Hypothesis For Ethiopia," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 11(2), pages 121-137.
    5. Abdul Rehman & Laura Mariana Cismas & Ioana Anda Milin, 2022. "“The Three Evils”: Inflation, Poverty and Unemployment’s Shadow on Economic Progress—A Novel Exploration from the Asymmetric Technique," Sustainability, MDPI, vol. 14(14), pages 1-16, July.

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    More about this item

    Keywords

    GDP; inflation; unemployment; cointegration; Bhutan;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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