Oil Price Volatility and its Impact on Economic Growth in Pakistan

The main objective of this research is to analyze the impact of oil price volatility on the economic growth of Pakistan. Secondary data from 1973 to 2011 were used to estimate the coefficients. Linear Regression analysis is used to analyze the dependency among the dependant and independent variables. All variable Oil price, Oil supply, oil demand, Gross Domestic production, Public sector investment, private sector investment and Trade balance is stationary at 1st Difference through ADF test. Trade Balance, Private sector investments have a significant effect on Gross domestic production and Public sector investment, Oil price volatility has insignificant impact on Gross domestic production. Government should make a proper plan and procedure according to Pakistan’s economic growth and requirement which would help to maintain the equilibrium of oil demand and supply and decreased the impact of oil price volatility on the economic growth. Meanwhile, the government of Pakistan also focused on its trade balance and also tries to increase private sector investment to increase its economic growth.

[1]  R. Siddiqui.  Demand for energy and the revenue impact of changes in energy prices , 1999 .

[2]  Analysis of the Impact of High Oil Prices on the Global Economy , 2004 .

[3]  James D. Hamilton.  This is what happened to the oil price-macroeconomy relationship , 1996 .

[4]  Michael Kumhof,et al.  The Future of Oil: Geology Versus Technology , 2012, SSRN Electronic Journal.

[5]  I. Mangla.  Reconstructing the Performance of Pakistan's Political Economy: Another Paradigm , 2011 .

[6]  James D. Hamilton.  Causes and Consequences of the Oil Shock of 2007–08 , 2009 .

[7]  James D. Hamilton.  Oil and the Macroeconomy since World War II , 1983, Journal of Political Economy.

[8]  Robert K. Kaufmann,et al.  Modelling the world oil market: Assessment of a quarterly econometric model , 2007 .

[9]  J. Rotemberg.  International Dimensions of Monetary Policy : Comment on "The Macroeconomic Effects of Oil Price Shocks: Why are the 2000s so different from the 1970s?" , 2007 .

[10]  Afia Malik.  How Pakistan is coping with the Challenge of High Oil Prices , 2007 .

[11]  Islam Rizvanoghlu.  Oil and Macroeconomy , 2013 .

[12]  Latife Ghalayini.  The Interaction between Oil Price and Economic Growth , 2011 .

[13]  H. Soomro,et al.  Oil Price Shocks: A Comparative Study on the Impacts in Purchasing Power in Pakistan , 2011 .

[14]  Lin Lawell,et al.  Estimating Supply and Demand in the World Oil Market , 2008 .

[15]  INPUT PRICE SHOCKS AND THE SLOWDOWN IN ECONOMIC GROWTH: THE CASE OF U.K. MANUFACTURING , 1982 .

[16]  Benjamin L Hunt,et al.  The Macroeconomic Effects of Higher Oil Prices , 2001, National Institute Economic Review.

[17]  Ljiljana Maskovi c.  Economic Survey of Pakistan . , 1950 .