A Step towards enhancement of Macroeconomic Performance of Pakistan: Do Oil Price, Public Expenditures and Financial Development Matter?

Authors

  • Imran Sharif Chaudhry Dean of Social Sciences and Director, School of Economics Bahauddin Zakariya University, Multan, Pakistan
  • Muhammad Faheem Assistant Professor, School of Economics Bahauddin Zakariya University Multan, Pakistan
  • Javaid Hussain MPhil Scholar, School of Economics, Bahauddin Zakariya University, Multan, Pakistan
  • Rashid Ahmad Assistant Professor, School of Economics Bahauddin Zakariya University Multan, Pakistan

DOI:

https://doi.org/10.47067/ramss.v4i1.108

Keywords:

Oil Price, Macroeconomic Performance, ARDL, Pakistan

Abstract

Oil price fluctuations have vital importance in macroeconomic performance. Our study demonstrates the impact of oil price fluctuations on the trade balance and economic growth in Pakistan. We employ a linear autoregressive distributed lag model (ARDL) for the period 1970-2018. The results showed that oil price negatively affected the total trade balance in Pakistan other control variables like the real effective exchange rate, real GDP (Home country) and financial development also negatively affected. While real GDP (Foreign country) influenced trade balance positively. In the second model, the results showed that oil price negatively affected economic growth in Pakistan and other control variables like government expenditure, financial development and gross capital formation are positively affected. The study results are useful for policymakers and government officials for making the policies regarding long-run economic growth as well as trade balance improvement.

References

Ahad, M., & Anwer, Z. (2020). Asymmetrical relationship between oil price shocks and trade deficit: Evidence from Pakistan. The Journal of International Trade & Economic Development, 29(2), 163-180.

Allegret, J. P., Couharde, C., Coulibaly, D., & Mignon, V. (2014). Current accounts and oil price fluctuations in oil-exporting countries: the role of financial development. Journal of International Money and Finance, 47, 185- 201.

Baek, J., Ikponmwosa, M. J., & Choi, Y. J. (2019). Crude oil prices and the balance of trade: Asymmetric evidence from selected OPEC member countries. The Journal of International Trade & Economic Development, 28(5), 533-547.

Boheman, H., & Maxén, J. (2015). Oil Price Shocks Effect on Economic Growth- OPEC versus non-OPEC Economies.

Chaudhry, I. S., Azali, M., Faheem, M., & Ali, S. (2020). Asymmetric Dynamics of Oil Price and Environmental Degradation: Evidence from Pakistan. Review of Economics and Development Studies, 6(1), 1-12.

Duasa, J. (2007). Determinants of Malaysian trade balance: An ARDL bound testing approach. Global Economic Review, 36(1), 89-102.

Faheem, M., Azali, M., Chin, L., & Mazlan, N. S. (2020). Asymmetric effect of oil price changes on trade balance in Saudi Arabia, Kuwait and United Arab Emirates. Pakistan Journal of Commerce and Social Sciences (PJCSS), 14(3), 685-714.

Faheem, M., Azali, M., Chin, L., & Mazlan, N. S. (2020). New evidence of oil price fluctuations and manufacturing output in Saudi Arabia, Kuwait and United Arab Emirates. Pakistan Journal of Commerce and Social Sciences (PJCSS), 14(1), 300-333.

Faheem, M., Azali, M., Chin, L., & Mazlan, N. S. (2021) Does oil price spur public expenditures in Saudi Arabia, Kuwait and United Arab Emirates?. Journal of Public Affairs, e2604.

Jo, S., Karnizova, L., & Reza, A. (2019). Industry effects of oil price shocks: A re- examination. Energy Economics, 82, 179-190.

Kilian, L., Rebucci, A., & Spatafora, N. (2009). Oil shocks and external balances. Journal of international Economics, 77(2), 181-194.

Le, T. H., & Chang, Y. (2013). Oil price shocks and trade imbalances. Energy Economics, 36, 78-96.

Mahboub, A. A., & Ahmed, H. E. (2017). The effect of oil price shocks on the Saudi manufacturing sector. Economics, 5(3), 230-238.

Nasir, M. A., Al-Emadi, A. A., Shahbaz, M., & Hammoudeh, S. (2019). Importance of oil shocks and the GCC macroeconomy: A structural VAR analysis. Resources Policy, 61, 166-179.

Nasir, M. A., Naidoo, L., Shahbaz, M., & Amoo, N. (2018). Implications of oil prices shock for the major emerging economies: A comparative analysis of BRICS. Energy Economics, 76, 76-88.

Nazir, S., & Qayyum, A. (2014). Impact of oil price and shocks on economic growth of Pakistan: Multivariate Analysis.

Ozlale, Ü. & Pekkurnsz, D. (2010). Oil prices and current account: A structural analysis for the Turkish economy. Energy Policy, 38(8), 4489-4496.

Pesaran, H. H., & Shin, Y. (1998). Generalized impulse response analysis in linear multivariate models. Economics letters, 58(1), 17-29.

Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of applied econometrics, 16(3), 289-326.

Rafiq, S., Sgro, P., & Apergis, N. (2016). Asymmetric oil shocks and external balances of major oil exporting and importing countries. Energy Economics, 56, 42-50.

Raheem, I. D. (2017). Asymmetry and break effects of oil price-macroeconomic fundamentals dynamics: The trade effect channel. The Journal of Economic Asymmetries, 16, 12- 25.

Downloads

Published

2021-03-31

How to Cite

Chaudhry, I. S. ., Faheem, M., Hussain, J. ., & Ahmad, R. . (2021). A Step towards enhancement of Macroeconomic Performance of Pakistan: Do Oil Price, Public Expenditures and Financial Development Matter?. Review of Applied Management and Social Sciences, 4(1), 157-168. https://doi.org/10.47067/ramss.v4i1.108

Most read articles by the same author(s)