Effect of the Supply-Side factors on inflation in South Asia: An analysis of oil price, technology, and labor market dynamics

Abstract

As a long-lasting and ongoing economic problem, inflation significantly affects how society views socioeconomic concerns and how people go about living their daily lives. For South Asian economies, inflation is not only a hypothetical economic concept; it is a brutal reality that affects their capacity to pay for necessities. Therefore, this study examines the effects of oil prices, technological advances, and labor market dynamics on inflation using the Panel ARDL on a subset of South Asian countries over the years 1995 to 2022. The Hausman test recommends PMG estimates while the cointegration test verifies the presence of long-run correlations between variables. According to the findings of this study, oil prices contribute to inflation in South Asian economies. Moreover, technological advancements have the ability to lower inflationary pressures. The overall condition of the labor market particularly is reflected in factors like employment rates, which have a signaficant impact on inflation. Tight labor markets can result in short-term demand-pull inflation when workers demand higher wages. On the other hand, cost-push inflation may occur if wages continue to rise steadily over time.

Keywords

• Cost-push inflation
• Labor market dynamics
• Energy prices
• Technological innovations