Analyzing the Effect of Financial Development and Misery Index on Human Development and Economic Growth: A Panel Data Analysis

Abstract

Economic growth, human development, and the misery index form a connected harmony. As economic growth generates the wealth required for progress, the misery index highlights the everyday distress of inflation and unemployment, and human development reflects whether this wealth actually translates into a better quality of life. The misery index, calculated as the sum of a nation's inflation and unemployment rates, is a barometer of macroeconomic distress. A high misery index seriously stunts human development and economic growth by eroding purchasing power, plummeting investments, and shrinking household access to essential healthcare and education. Considering the significance of the misery index, we have examined its role in affecting human development and economic growth in developing countries. For this, we have utilized data from 1996 to 2023 from some developing countries. We have used the human development index and economic growth as dependent variables. However, financial development, foreign direct investment, misery index, and population growth were used as independent variables. OLS results found that financial development and foreign direct investment have promoted human development and economic growth in developing countries. On the other hand, the misery index affected human development and economic growth negatively. In addition, result shows that population growth has negatively affected both human development and economic growth in developing economies. It is suggested that more financial opportunities should be provided for more human development and economic growth in these countries. There should be a more stable environment for attracting more foreign direct investment. This will increase economic growth and human development. Finally, efforts should be made to reduce unemployment and inflation by providing more employment chances to the people of the economies.