Abstract
This study empirically investigates the dynamic relationship between global oil price fluctuations and industrial sector of Pakistan for the time period 1974-2015 by employing an Autoregressive Distributed Lag Model. The findingssuggest that industrialsector is prone to the global
oil price fluctuations where observed and forecasted oil price volatility along with the net oil
price increase relative to preceding three years has negatively significant effect on industrial
value added share in GDP. Moreover, the oil price shock driven by the global demand has positive while the oil market-specific shock geared by precautionary increase in oil demand has
negative effect on industrial value added, in the long run. Overall, uncertain oil price fluctuations
and endogenously determined nature of oil price increase has dominant effect on the industrial
sector in Pakistan than the annual oil price changes. The findings suggests domestic price stability along with move towards export diversification to form a strong industrial base rendering
international oil price fluctuationsimpartial, on the one hand and for reaping the potential benefits of devaluation of domestic currency, on the other. However, improved energy efficiency
and low oil dependency in the long run will be required to stimulate the industrialsector’s contribution in GDP.
Bushra YASMIN. (2020) INDUSTRIAL SECTOR AND GLOBAL OIL PRICE FLUCTUATIONS: A Case Study of Pakistan, Pakistan Journal of Applied Economics, Volume 30, Issue 1.
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