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Abstract

Unemployment and inflation are persistent economic challenges in every society, particularly in developing countries. Economic theories suggest that in the short term, higher inflation can lead to lower unemployment. This study examines the effects of inflation on unemployment in Afghanistan using time-series data from 2001 to 2020. The Autoregressive Distributed Lag (ARDL) model is employed to analyze the relationship between these two macroeconomic variables. The findings indicate that in the long run, inflation has a negative relationship with the unemployment rate, where a 1% increase in inflation is associated with a 0.062% decrease in unemployment. However, this relationship is not statistically significant. In contrast, the short-run analysis reveals a positive and significant correlation, showing that a 1% increase in inflation leads to a 0.878% rise in unemployment. Diagnostic tests confirm that the model’s residuals are homoscedastic, exhibit no serial correlation, and maintain stability.

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Unemployment Inflation Money Monetary Policy Gov Expenditure FDI

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Sediqi, F. A., & Rahin, A. (2025). Inflation and Its Impact on Unemployment in Afghanistan. Journal of Social Sciences - Kabul University, 7(4), 233–250. https://doi.org/10.62810/jss.v7i4.131
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