Oil Price Shocks: A Comparative Study on the Impacts in Purchasing Power in Pakistan

Abstract

<p>The current research investigates the relationship between changes in crude oil prices and Pakistan and the macro-economy. A multivariate VAR analysis is carried out among five key macroeconomic variables: real gross domestic product, short term interest rate, real effective exchange rates, long term interest rate and money supply. From the VAR model, the impulse response functions reveal that oil price movements cause significant reduction in aggregate output and increase real exchange rate. The variance decomposition shows that crude oil prices significantly contribute to the variability of real exchange rate long term interest rate in the Pakistan economy while oil price shocks are found to have significant effects on money supply and short term interest rate in the economy. Despite these macro econometric results, caution must be exercised in formulating energy policies since future effects of upcomming oil shocks will not be the same as what happened in the past. Explorations and development of practicable alternatives to imported fuel energy will cushion the economy from the repercussions of oil shocks. Oil price shock has negative impact on the GDP and as well as economy of Pakistan.</p

Global Energy Transition and the Role of Energy Mix in Creating Energy Crisis in Pakistan

“…The existing literature on energy crisis of Pakistan rests with overwhelmingly consensus that existing energy mix of the country is not only economically irrational (Jamali et al, 2011;Haider et al, 2014;Khan & Abbas, 2016;Hussain, 2018;Rafique & Rehman, 2017) but also a reflection of existing dearth of political stability and paucity of energy institutional capacity.…”

Impact of Oil Price Shocks on the Sri Lankan Economy: A Vector Auto Regression Assessment

“…Net oil price increases in India affects inflation and net oil price decrease affects exchange rate (Ghos and Kanjilal, 2014). In Pakistan, crude oil prices significantly contribute to the variability of real exchange rate and the long term interest rate, and oil price shocks have significant impacts on money supply and short term interest rate (Jamali et al, 2011). There have not been similar time series studies which have looked at the effects of oil price shocks in Sri Lanka.…”

Impact of Oil Price and Shocks on Economic Growth of Pakistan: Multivariate Analysis (Sectoral Oil Consumption)

“…Trends in the data but have no trends in cointegration regression. As discussed in the Johansen [34,35,48] and Johansen and Juselius [34,49] Table 7. According to the Trace test statistics the null hypotheses r = 0 and r ≤ 1 is rejected at 5% against alternative hypotheses r ≥ 1and r ≤ 2.…”