Investigation of Energy Inflation Dynamics in Pakistan: Revisiting the Role of Structural Determinants
DOI:
https://doi.org/10.47067/ramss.v4i2.137Keywords:
Energy, Inflation, Oil Prices, Economic GrowthAbstract
Enormous fluctuation has been observed in energy prices in recent years. This strong volatility in energy prices implies grave inferences for Pakistan’s economy as shown by its substantial dependence on imported fuels. In Pakistan, energy prices play a critical role in inflation determination also concluded in the study at hand. The index of energy inflation was constructed, and the role of various control variables such as board money, taxes, oil prices, energy import, and GDP has been elaborated. Current study endeavors to examine the determinants of energy inflation in Pakistan by using time-series data for 1991 to 2019. Unit root was tested by utilizing ADF, furthermore, the Bound test suggested ARDL cointegration for empirical analysis. Therefore, an increase in the demand for energy in economic activities in developing countries indicates an energy demand hence implies energy inflation. The government of Pakistan must focus on the role of these factors to control inflation and to enhance the welfare in the country.
References
Abdullah, M., & Kalim, R. (2012). Empirical analysis of food price inflation in Pakistan. World Applied Sciences Journal, 16(7), 933-939.
Ahmed, Q. M., Muhammad, S. D., Noman, M., & Lakhan, G. R. (2014). Determinants of recent inflation in Pakistan: Revisit. Pakistan Journal of Commerce and Social Sciences (PJCSS), 8(1), 170-184.
Ahmed, Q. M., Muhammad, S. D., Noman, M., & Lakhan, G. R. (2014). Determinants of recent inflation in Pakistan: Revisit. Pakistan Journal of Commerce and Social Sciences (PJCSS), 8(1), 170-184.
Ahsan, H., Iftikhar, Z., & Kemal, M. A. (2011). The determinants of food prices: A case study of Pakistan. Working Papers & Research Reports, 2011.
Altowaijri, H. A. (2011). Determinants of inflation in Saudi Arabia. World Review of Business Research, 1(4), 109-114.
Aziz, S., Yaseen, M. R., & Anwar, S. (2016). Impact of Rising Energy Prices on Consumer’s Welfare: A Case Study of Pakistan. The Pakistan Development Review, 55(4 Part I &), 605-618.
Bashir, F., Yousaf, F., & Aslam, H. (2016). Determinants of Inflation in Pakistan: Demand and Supply Side Analysis. Journal of Finance and Economics Research, 1(1), 1-15.
Beck, G. W., Hubrich, K., & Marcellino, M. (2009). Regional inflation dynamics within and across euro area countries and a comparison with the United States. Economic Policy, 24(57), 142-184.
Carriero, A., Corsello, F., & Marcellino, M. G. (2019). The global component of inflation volatility.
Çelik, T., & Akgül, B. (2011). Changes in fuel oil prices in Turkey: an estimation of the inflation effect using VAR analysis. Journal of Economics and Business, 14(2), 11-21.
Ciner, C. (2001). Energy shocks and financial markets: nonlinear linkages. Studies in Nonlinear Dynamics & Econometrics, 5(3).
Dhakal, D., Kandil, M., Sharma, S. C., & Trescott, P. B. (1994). Determinants of the Inflation rate in the United States: A VAR Investigation. The Quarterly Review of Economics and Finance, 34(1), 95-112.
Dua, P., & Gaur, U. (2010). Determination of inflation in an open economy Phillips curve framework: The case of developed and developing Asian countries. Macroeconomics and Finance in Emerging Market Economies, 3(1), 33-51.
Förster, M., & Tillmann, P. (2013). Local Inflation: Reconsidering the International Comovement of Inflation (No. 03-2013). Joint Discussion Paper Series in Economics.
Giebel, M., & Kraft, K. (2018). The impact of the financial crisis on capital investments in innovative firms. Industrial and Corporate Change.
Haider, A., Ahmed, Q. M., & Jawed, Z. (2013, December). Determinants of energy inflation in Pakistan: an empirical analysis. In PIDE, 29th AGM Conference Paper.
Hanif, M., Iqbal, J., & Khan, I. N. (2017). Global Commodity Prices and Domestic Inflation: A Case Study of Pakistan. SBP Research Bulletin, 13, 21-51.
Hart, R. (2018). Rebound, directed technological change, and aggregate demand for energy. Journal of Environmental Economics and Management, 89, 218-234.
Henriques, I., & Sadorsky, P. (2008). Oil prices and the stock prices of alternative energy companies. Energy Economics, 30(3), 998-1010.
Hossain, T., & Islam, N. (2013). An economic analysis of the determinants of inflation in Bangladesh. The International Journal of Social Science, 11(1), 29-36.
Johansen, S., & Juselius, K. (1990). Maximum likelihood estimation and inference on cointegration—with applications to the demand for money. Oxford Bulletin of Economics and statistics, 52(2), 169-210.
Kasidi, F., & Mwakanemela, K. (2013). Impact of inflation on economic growth: A case study of Tanzania. Asian Journal of empirical research, 3(4), 363-380.
Khan, F. N., & Ahmad, E. (2009). Testing the Law of One Price: A Comparison between Pakistan and Australia. Forman Journal of Economic Studies, 5, 1-16.
Khan, M. M. S., & Schimmelpfennig, M. A. (2006). Inflation in Pakistan: Money or wheat? (No. 6-60). International Monetary Fund.
Lodhi, R. N., Siddiqui, M. A., & Habiba, U. (2013). Empirical investigation of the factors affecting foreign direct investment in Pakistan: ARDL approach. World Applied Sciences Journal, 22(9), 1318-1325.
Mohanty, M. S., & Klau, M. (2001). What determines inflation in emerging market economies?. BIS Papers, 8, 1-38.
Nawaz, S., Iqbal, N., & Anwar, S. (2013). Electricity demand in Pakistan: a nonlinear estimation. The Pakistan Development Review, 479-491.
Noor, A., & Chaudhary, M. A. (2009). Economic Management and Roots of Inflation in Pakistan. Economic Management, 5, 17-34.
Chaudhry, I. S., Safdar, N., & Farooq, F. (2012). Energy consumption and economic growth: Empirical evidence from Pakistan. Pakistan Journal of Social Sciences, 32(2), 371-382.
Safdar, N., Chaudhry, I. S., & Chaudhry, M. O. (2019). Energy Consumption, Environmental Degradation and Economic Growth in Developing Countries. Pakistan Journal of Social Sciences (PJSS), 39(2).
Safdar, N. (2020). How do Energy Consumption, Environmental Degradation and Macroeconomic Performance Cause in Developing Countries? An Analysis. Journal of Business and Social Review in Emerging Economies, 6(3), 1189-1197.
Pesaran, M. H. (1997). The role of economic theory in modelling the long run. The Economic Journal, 107(440), 178-191.
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.
Raza, S. A., Shahbaz, M., & Nguyen, D. K. (2015). Energy conservation policies, growth and trade performance: Evidence of feedback hypothesis in Pakistan. Energy Policy, 80, 1-10.
Saleem, N. (2008). Measuring volatility of inflation in Pakistan.
Shabbir, M. S., Shariff, M. N. M., Asad, M., Salman, R., & Ahmad, I. (2018). Time-frequency Relationship between Innovation and Energy Demand in Pakistan: Evidence from Wavelet Coherence Analysis. International Journal of Energy Economics and Policy, 8(5), 251-258.
Tafti, F. C. (2012). Determinants of inflation in Islamic Republic of Iran. International Journal of business and social Science, 3(6).
Yiping, H., Xun, W., & Xiuping, H. (2010). What Determine China’s Inflation? China Center for Economic Research Working Paper, 2.
