Examining the Dynamics of Unemployment, GDP, Inflation, Government Education Expenditure, and Foreign Direct Investment in Pakistan's Transitioning Economy: An Econometric Analysis

This study aims to analyze the interrelationship between unemployment, GDP, inflation, government expenditure on education, and foreign direct investment (FDI) in Pakistan’s steadily transitioning economy. To achieve this objective, the study employs both descriptive and econometric analyses, utilizing Ordinary Least Squares (OLS), Autoregressive Conditional Heteroskedasticity (ARCH), and Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models. The analysis is based on annual time series data spanning from 1990 to 2023. The results indicate a negative relationship between FDI and GDP in the context of unemployment. Specifically, a high unemployment rate is found to impede the growth of both FDI and GDP. Furthermore, inflation and government expenditure on education exhibit a direct influence on unemployment levels. In light of these findings, the study recommends enhancing industrial and agricultural productivity by adopting innovative practices, substituting foreign goods with domestically produced alternatives, and expanding the presence of domestic products in international markets. These measures are essential for addressing the prevailing macroeconomic challenges in Pakistan.