The Inflation-Unemployment Trade-Off in Bangladesh: Empirical Insights for Accelerating Progress towards Zero Poverty (SDG 1)

Author:Shuvongkor Kumar Datta, S.K.S. Yadav, Jubair Ansary, Ariful Islam

Abstract:
This study empirically investigates the inflation-unemployment trade-off in Bangladesh and assesses its implications for achieving Sustainable Development Goal 1 (SDG 1) of zero poverty. High inflation erodes the real income of the poor, while unemployment directly limits earning capabilities, making the interplay between these variables a central determinant of poverty reduction. Using annual time-series data from 1990 to 2024, we employ an Autoregressive Distributed Lag (ARDL) model to test for the existence and stability of a long-run relationship. Our findings confirm a significant short-run trade-off but reveal that this relationship is unstable and weakens in the long run, suggesting that other structural factors dominate. The results indicate that unanticipated inflationary shocks disproportionately harm the poor, and persistent unemployment remains a formidable barrier to inclusive growth. The study concludes that a singular focus on either price stability or employment generation is insufficient for attaining SDG 1. Instead, Bangladesh requires an integrated policy framework that combines prudent monetary policy to control the inflation rate with targeted fiscal measures, investments in human capital, and productive sector diversification to generate new employment opportunities. This holistic approach is essential to effectively manage the trade-off and accelerate progress towards eliminating poverty.

Keywords:Inflation, Unemployment, Poverty, SDG 1, Bangladesh, ARDL.

DOI:10.46333/ijtc/14/2/2

International Journal of Trade & Commerce (Vol: 14 Issue:2)