The effects of inflation on economic growth and unemployment in light of the global financial crisis in BRICS countries

The key critical role played by Central Banks’ monetary policy and government macroeconomic policy relies on precise and timely forecasts on economic growth along the business cycle periods. In the past, many emerging countries have been facing problems of high escalating inflationary prices. This dissertation is set out to examine the influence of inflation on output growth and unemployment considering the global financial crisis in BRICS countries using annual data collected over the period 1980 to 2016. The study is divided into two sections; namely macroeconomic policy and monetary policy principles. The empirical analyses are computed through using the Autoregressive Distributed Lag (ARDL) approach proposed by Pesaran et al. (2001). The macroeconomic policy findings show that there is a negative long run relationship between inflation and economic growth in Russia and South Africa. The study’s ARDL bounds test for cointegration results also indicated that there is statistically significant long run comovement between inflation and economic growth in all BRICS countries. The study results also provided that there is an existence of a negative short run relationship between inflation and economic growth in South Africa. The Phillips curve results indicated that a positive long run trade-off between inflation and unemployment is found and no short run relationship discovered. It is also revealed that the long run co-movement between inflation and unemployment only exists in Russia and South Africa. The study is significant because it contributes to the empirical determinants of long term prosperity of the BRICS partners