International oil prices and consumer prices in Pakistan: is the relationship symmetric? Online publication date: Fri, 29-Jun-2018
by Syed Tehseen Jawaid; Mohammad Haris Siddiqui; Muhammad Shahbaz
Global Business and Economics Review (GBER), Vol. 20, No. 4, 2018
Abstract: This study empirically examines the effect of international oil prices on aggregated and disaggregated consumer prices in Pakistan by employing annual time series data for the period of 1981-2011. Cointegration results confirm the existence of the positive long run relationship between international oil prices and consumer prices in Pakistan in all models except clothing and footwear and medical care and health. Furthermore, the error correction model unveils no immediate or short-run relation between oil prices and consumer prices. Similarly, our empirical evidence also reveals asymmetric relationship between international oil prices and consumer prices. Results indicate that the positive shock in international oil price has a significant positive effect in all models. On the other hand, negative shock in oil price has insignificant effect. It is suggested that prevention of cartel, implementation of antitrust law and reduction in borrowing constraints could be used to tackle the problem of asymmetric behaviour.
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