The Asymmetric Effects of Inflation and Unemployment on Economic Growth in Syria Using the NARDL Approach

Abstract

This research aims to analyze the asymmetric effects of unemployment (UEM) and inflation (INF) on economic growth (EG) in Syria during the period 1990-2022 using the Nonlinear Autoregressive Distributed Lag (NARDL) model. Annual data was utilized, and the model was designed to examine the impact of positive and negative shocks of the independent variables on economic growth while analyzing both long- and short-term relationships. The methodology included selecting the best-fitting model using the Akaike Information Criterion (AIC), estimating the long-term equation by incorporating the effects of positive and negative shocks of both unemployment and inflation, and conducting a bounds test to verify the presence of cointegration among the variables. Shock analysis was also employed to investigate the evolution of variable impacts over time.The results of the long-term equation revealed that negative shocks in unemployment (declining unemployment) significantly enhance economic growth, with a coefficient of -2.205 at a high level of significance (0.0005). In contrast, positive shocks (rising unemployment) exert a stronger negative impact, with a coefficient of -3.283. Regarding inflation, positive shocks demonstrated a weak positive effect on economic growth, with a coefficient of 0.066 at a significance level of 0.0431, while negative shocks had a more pronounced negative impact, with a coefficient of -0.185 at a significance level of 0.0045. The study recommends implementing economic policies aimed at sustainably reducing unemployment rates and enhancing price stability to mitigate the adverse effects of inflation. Additionally, it emphasizes improving the mechanisms by which the economy responds to unexpected economic shocks.