A Step towards enhancement of Macroeconomic Performance of Pakistan: Do Oil Price, Public Expenditures and Financial Development Matter?

Abstract

Oil price fluctuations have vital importance in macroeconomic performance. Our study demonstrates the impact of oil price fluctuations on the trade balance and economic growth in Pakistan. We employ a linear autoregressive distributed lag model (ARDL) for the period 1970-2018. The results showed that oil price negatively affected the total trade balance in Pakistan other control variables like the real effective exchange rate, real GDP (Home country) and financial development also negatively affected. While real GDP (Foreign country) influenced trade balance positively. In the second model, the results showed that oil price negatively affected economic growth in Pakistan and other control variables like government expenditure, financial development and gross capital formation are positively affected. The study results are useful for policymakers and government officials for making the policies regarding long-run economic growth as well as trade balance improvement.

How Do Oil Prices Affect the GDP and its Components? New Evidence from a Time-Varying Threshold Model

“…The findings in Table 6 indicate that oil prices have a larger effect on exports for importing countries when its level surpasses the optimal threshold level, confirming the results of Chaudhry et al (2021) which showed that an increase in the price of oil is not in favor of the trade balance of oil-importing countries. Soaring oil prices tend to deteriorate the trade balance and the economic growth of these countries.…”

“…Soaring oil prices tend to deteriorate the trade balance and the economic growth of these countries. According to Chaudhry and al. (2021) findings, lower oil prices improve the trade balance as well as economic growth.…”

Factors Affecting Foreign Direct Investment: The Case of the Netherlands

“…This methodology has advantages over traditional econometric methodologies. It can be applied even in the case of a small sample; It is suitable if all variable is stationary at level I(0) or 1st difference or mix the order of integration (Chaudhry et al, 2021;Farooq et al, 2020). The study has applied the F-bound test to check the long-term co-integration between variables.…”

Fuel subsidies to curb cost-push inflation: a case study of Pakistan to assess the impact of untargeted subsidies on fiscal space and current accounts

“…The growing dependance on imported fuels in total energy consumption has significantly exposed the internal and external accounts of the country to the movement of global fuel prices, inter-alia, crude oil, coal and re-gasified liquified natural gas (RLNG). Accordingly, the unfavorable movements cause deterioration of the trade balance, real effective exchange rate, and overall financial development (Chaudhry et al 2021). This can be demonstrated through the trend of the progressive exposure of: (i) percentage energy subsidies in the total fiscal budget; (ii) energy imports (Bln.…”