Macro-Economic Consequences of Energy Price Shocks: Empirical Evidence of Pakistan

Abstract

This study examined the macro-economic consequences of energy price shocks in Pakistan. Energy prices take part an imperative role in the economic growth of Pakistan. The study objective to examines the influence of energy price shocks to the macroeconomic indicators. The reason of the study is to find out the impact of shocks of energy prices on macroeconomic indicators in Pakistan during 1980 to 2019. The analysis is carried out employing vector autoregressive (VAR) model. Impulse response functions results indicate that energy price shocks reduce the GDP. Overall findings for this study identify that high energy prices contain negative impact on GDP in Pakistan. The study implies that policy makers should develop, adopt, and initiate some imperatives to control the unanticipated volatility and movements in energy prices. The study highlights that policy should be designed to control the fluctuation in energy prices and to plan energy conservative policies that will motivate to discover the alternative energy sources to meet increasing energy demand in Pakistan and improve economic growth.