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Gas Prices and Industrial Production Level: Empirical Evidence from Pakistan

Author

Listed:
  • Farhan Ahmed

    (Shaheed Zulfikar Ali Bhutto Institute of Science & Technology, Karachi, Pakistan)

  • Muhammad Kashif

    (Shaheed Zulfikar Ali Bhutto Institute of Science & Technology, Karachi, Pakistan)

  • Mumtaz Ahmed

    (University of Turbat, Turbat, Pakistan.)

Abstract

Pakistan has a vast industrial base which contributes a large portion in economic growth and employs a large population directly and indirectly. The purpose of this research is to examine the shocks of natural gas prices on the industries that use extensive amount of natural gas in their production as raw material and heating source. The industries taken under study are cement, cotton cloth, cotton yarn, glass, nitrogen fertilizer, phosphorus fertilizer, paper and board, sheet iron and synthetic fiber and billet iron. Vector Auto regression (VAR) is applied to check the shocks using monthly data from January 2012 to September 2017, collected from Pakistan Bureau of Statistics (PBS). Impulse response function (IRF), Variance Decomposition and Granger Causality test were executed from VAR estimates to examine gas price shocks on industrial production level in short and long run. Results reveal that gas prices have shocks in short run on all major industries but in long run they seems to stabilize and the effect is minimized. The idea of the study is original and findings help investors, policymakers and regulatory authorities as lots of researches have been undertaken on oil prices shocks and industrial production, while none of research has been conducted on gas prices shocks and industrial production.

Suggested Citation

  • Farhan Ahmed & Muhammad Kashif & Mumtaz Ahmed, 2018. "Gas Prices and Industrial Production Level: Empirical Evidence from Pakistan," International Journal of Energy Economics and Policy, Econjournals, vol. 8(3), pages 22-32.
    • Handle: RePEc:eco:journ2:2018-03-4
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    References listed on IDEAS

    as
    1. Stephen P. A. Brown & Mine K. Yucel, 2008. "What Drives Natural Gas Prices?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 45-60.
    2. Frank Asche & Petter Osmundsen & Maria Sandsmark, 2006. "The UK Market for Natural Gas, Oil and Electricity: Are the Prices Decoupled?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 27-40.
    3. Don Bredin & John Elder & Stilianos Fountas, 2010. "The Effects of Uncertainty about Oil Prices in G-7," Working Papers 200840, Geary Institute, University College Dublin.
    4. Farhan Ahmed & Muhammad Osama Daudpota & Muhammad Kashif, 2017. "Oil Price Shocks And Industry Level Production Using Vector Autoregression: Empirical Evidence From Pakistan," Global Journal of Business Research, The Institute for Business and Finance Research, vol. 11(3), pages 13-25.
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    Cited by:

    1. Juan Manuel Candelo-Viafara & Andres Oviedo-Gomez & Maria Del Pilar Rivera-Diaz, 2023. "Exploring the Effects of Oil and Gas Prices on Industrial Production in Colombia: A Quantile Regression Analysis," International Journal of Energy Economics and Policy, Econjournals, vol. 13(6), pages 364-369, November.

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    More about this item

    Keywords

    Gas Prices; Impulse Response Function; Industrial Production Level;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources

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