The effects of military expenditure and inflation on the unemployment in Pakistan

Abstract

This study examines the effect of inflation and military expenditure on unemployment in the case of Pakistan. This study used the data set from 1972-2021 and, based on the behaviour of the data, employed the ARDL procedure for assessment. This study found that FDI, GDP, inflation, military expenditure, gross capital formation, and human capital have adverse and noteworthy effects on unemployment over a long period. However, the FDI, GDP, military expenditure, gross capital formation, and human capital have an inconsequential impact on the unemployment rate. However, inflation has an adverse and noteworthy effect on unemployment in a short period. Furthermore, there exists a bi-directional causality between military expenditure and unemployment, while there exists no causality between inflation and unemployment, and military expenditure and inflation. This study concluded that the rise in military expenditure and inflation inversely influence unemployment in Pakistan. This study supported the Philips theory in Pakistan that inflation and unemployment have an adverse link. Based on these findings, this study recommended that the government increase military expenditure to maintain peace in Pakistan and minimise inflation and unemployment.