Navigating the Multi-faceted Specter of Stag inflation in Divergent SCO Countries Economics

Abstract

This study investigates the complex and disruptive phenomenon of stagflation within the diverse economic landscapes of Shanghai Cooperation Organization (SCO) countries. Understanding its causes and impacts in these geopolitical significant nations, which range from resource-rich to populous, is vital for developing tailored policy solutions. Existing literature often lacks unambiguous conclusions regarding the unique manifestations of stagflation in such divergent economies. The research aims to identify the causes of stagflation, analyze its impact on economic growth and employment, and explore effective policy responses within SCO countries. Utilizing Ordinary Least Squares (OLS) and Random Effects models, framed by a New Keynesian Open Economy Dynamic Stochastic General Equilibrium (DSGE) theoretical framework, the study empirically assesses these relationships. Key findings indicate a significant negative relationship between GDP and unemployment (Okun's Law), while wages surprisingly show a negative correlation with inflation but a positive one with unemployment. The analysis underscores the need for country-specific policy tailoring and regional cooperation to foster economic resilience amid global uncertainties.