Exploring the impact of inflation, real interest rate, unemployment on economic growth in Sri Lanka

Abstract

Introduction

Economic growth is a fundamental goal of any developing nation, as it translates into rising living standards, job opportunities, and national prosperity. While Sri Lanka is a developing nation, that grappling with the challenges of post-conflict reconstruction, debt pressures, and external shocks, realizing steady which daunting the sustainable growth. Among the many important macroeconomic indicators, unemployment, real interest rate, and inflation have crucial role in economic growth (Selvnayagam and Mustafa, 2019). Fischer (1981) argued that major costs of inflation arises uncertainty of consumption, savings, borrowing, and investment decisions. IMF (1984) emphasize that interest rates affect economic growth by affecting saving and investment decisions. Patel and Makwana (2024) states that unemployment generates poverty, income inequality, lack of investment, and depletion in human capital. Therefore, relationships among these variables and economic growth need to be further examined.