This study analyzes the determinants of unemployment in Pakistan over a period of 1976-2012 by examining the empirical relation-ship among the unemployment, population, foreign direct investment, gross domestic product, inflation, and external debt. It is hypothesized that these factors exert a strong impact on unemployment rate in the economy of Pakistan. Autoregressive Distributed Lag (ARDL) approach has been applied to test determinants of unemployment. Empirical results reveal that gross domestic product, population, inflation, and foreign direct investment are significant determinants of unemployment in Pakistan in short-run as well as long-run. The CUSUM and CUSUMSQ are showing that the model is structurally stable within the 5% of critical bounds. The Phillips curve exists in Pakistan both in short- and long-run.

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