Asymmetrical relationship between oil price shocks and trade deficit: Evidence from Pakistan. Issue 2 (17th February 2020)

• Record Type: Journal Article
• Authors: Ahad, Muhammad; Anwer, Zaheer
• Is Part Of: Journal of international trade & economic development. Volume 29:Issue 2(2020)
• Page Start: 163
• Page End: 180
• Publication Date: 2020-02-17
• Subjects: Oil prices -- trade balance -- industrial growth -- Pakistan -- NARDL; F140; International trade -- Periodicals; Economic development -- Periodicals; 337
• DOI: 10.1080/09638199.2019.1655782
• Languages: English
• ISSNs: 0963-8199

Abstract

Abstract : This study investigates the asymmetric impact of oil price shocks on trade deficit for Pakistan economy, using NonLinear ARDL analysis, over the period of 1990QI -2016QIV. The estimation results confirm the presence of nonlinearity in the series. The bound testing approach also establishes the existence of asymmetric relationship between trade deficit and oil price movements. We find that increase (decrease) in oil prices and wholesale prices and decrease (increase) in industrial product results in a significant increase (decrease) in trade deficit. The adjustment pattern, using dynamic multipliers, reveals that the new long-run equilibrium for oil prices can be archived after 1 year and 2 months, wholesale prices by 3 years and 8 months and for industrial growth in 6 years and 6 months. This paper has important policy implications for Pakistani decision-makers.