Impact of Oil Price Volatility on Macroeconomic Variables (A Case Study of Pakistan)

Abstract

This study examines the impact of oil price volatility on macroeconomic variables of the economy of Pakistan. We employed the Glosten, Jagannathan and Runkle (GJR) and Vector Autoregressive (VAR) models. The outcomes of the GJR model show the symmetric effect of oil price shock on conditional variance. Whereas Impulse Response Functions (IRFs) show the hostile effect on the employment and the output. Although the oil price uncertainty affects the consumption but declining image is less severe. The trade deficit and consumer price index rise due to negative oil price shock in the long run.