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The impact of Oil Price and Oil Price Fluctuation on Growth Exports and Inflation in Pakistan

Hasanat Shah, Syed and Li, Jun Jiang and Hasanat, Hafsa (2013): The impact of Oil Price and Oil Price Fluctuation on Growth Exports and Inflation in Pakistan.

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Abstract

In this study we employed the ARDL bound test in order to detect cointegration relation of oil price and oil price fluctuation with GDP, exports and inflation in Pakistan. Our results confirmed cointegration among the variables when GDP was considered as dependent variable, while in case of inflation as responding variable, the long run relation among the variables are confirm only when oil price was replaced with oil price fluctuations as an explanatory variable. Applying VECM technique, we confirmed that causal link is running from oil price and oil price fluctuation to GDP and inflation. We could not detect causality running from oil prices and oil price fluctuation to exports or vice versa. Finally the augmented granger causality verified our findings of causal relation running from oil price and oil price fluctuation to GDP and Inflation both in combination with other variables as well as individually. We found that oil price fluctuation compared to oil prices drastically and asymmetrically affect the macro-economy of Pakistan.

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