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Crude Oil Price, Monetary Policy and Output: The Case of Pakistan

Author

Listed:
  • Afia Malik

    (Pakistan Institute of Development Economics, Islamabad.)

Abstract

This paper has analysed the impact of rising crude oil prices on output. Crude oil prices and real output are found to be strongly related, and this relationship has a bellshape. That is, when crude oil prices are below the critical level (i.e., 22 $s/bbl), the relationship between crude oil prices and real output is positive; whereas when the crude oil price rises and exceeds that critical level the relationship becomes negative. Moreover, high debt-GDP ratio, high deficit spending, and high real effective exchange rate would have a negative impact on output. While the existence of foreign exchange reserves and capital investment would cause output to rise.

Suggested Citation

  • Afia Malik, 2008. "Crude Oil Price, Monetary Policy and Output: The Case of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(4), pages 425-436.
    • Handle: RePEc:pid:journl:v:47:y:2008:i:4:p:425-436
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    File URL: http://www.pide.org.pk/pdf/PDR/2008/Volume4/425-436.pdf
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    Citations

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    Cited by:

    1. Jibran Hussain & Sallahuddin Hassan, 2019. "Global Energy Transition and the Role of Energy Mix in Creating Energy Crisis in Pakistan," Pakistan Journal of Humanities and Social Sciences, International Research Alliance for Sustainable Development (iRASD), vol. 7(2), pages :219-232, June.
    2. Shahriyar Mukhtarov & Sannur Aliyev & Javid Zeynalov, 2020. "The Effects of Oil Prices on Macroeconomic Variables: Evidence from Azerbaijan," International Journal of Energy Economics and Policy, Econjournals, vol. 10(1), pages 72-80.
    3. Akbar Ullah & Karim Khan & Munazza Akhtar, 2014. "Energy Intensity: A Decomposition Exercise for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 53(4), pages 531-549.
    4. Muhammad Ahad & Zaheer Anwer, 2021. "Asymmetric impact of oil price on trade balance in BRICS countries: Multiplier dynamic analysis," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(2), pages 2177-2197, April.
    5. Shamaila Aziz & Muhammad Rizwan Yaseen & Sofia Anwar, 2016. "Impact of Rising Energy Prices on Consumer’s Welfare: A Case Study of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 55(4), pages 605-618.
    6. Hafsa Hina & Abdul Qayyum, 2015. "Re-estimation of Keynesian Model by Considering Critical Events and Multiple Cointegrating Vectors," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 54(2), pages 123-145.
    7. Hina, Hafsa & Qayyum, Abdul, 2013. "Estimation of Keynesian Exchange Rate Model of Pakistan by Considering Critical Events and Multiple Cointegrating Vectors," MPRA Paper 52611, University Library of Munich, Germany.
    8. Rabia Najaf & Khakan Najaf, 2016. "Impact of Oil Prices on the Stock Exchange of Pakistan and Malaysia," Indian Journal of Commerce and Management Studies, Educational Research Multimedia & Publications,India, vol. 7(3), pages 72-76, September.
    9. Kashif Zaheer Malik & Haram Ajmal & Muhammad Umer Zahid, 2017. "Oil Price Shock and its Impact on the Macroeconomic Variables of Pakistan: A Structural Vector Autoregressive Approach," International Journal of Energy Economics and Policy, Econjournals, vol. 7(5), pages 83-92.
    10. Zalina Zainal, Zalina & Aziz, Mukhriz Izraf Azman & Md. Salleh, Mohd Faisol, 2021. "The Effect of Asymmetrical Relationship of Oil Price Shocks on Gross Domestic Product," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 55(2), pages 121-135.
    11. Liurong Pan & Asad Amin & Nian Zhu & Abbas Ali Chandio & Eric Yaw Naminse & Aadil Hameed Shah, 2022. "Exploring the Asymmetrical Influence of Economic Growth, Oil Price, Consumer Price Index and Industrial Production on the Trade Deficit in China," Sustainability, MDPI, vol. 14(23), pages 1-22, November.
    12. Ilyas, Rubina & Hussain, Khadim & Ullah, Mehreen Zaid & Xue, Jianhong, 2022. "Distributional impact of phasing out residential electricity subsidies on household welfare," Energy Policy, Elsevier, vol. 163(C).
    13. Hassan, Syeda Anam & Zaman, Khalid, 2012. "Effect of oil prices on trade balance: New insights into the cointegration relationship from Pakistan," Economic Modelling, Elsevier, vol. 29(6), pages 2125-2143.
    14. Muhammad Zeshan & Wasim Shahid Malik & Muhammad Nasir, 2019. "Oil Price Shocks, Systematic Monetary Policy and Economic Activity," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 58(1), pages 65-81.

    More about this item

    Keywords

    Oil Prices; Output; Pakistan; Macroeconomy;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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