Demand for Imported Crude Oil in Pakistan: NARDL Framework

International Journal of Economics and Management Studies

© 2018 by SSRG - IJEMS Journal

Volume 5 Issue 9

Year of Publication : 2018

Authors : Nazia Tabasam, NorwazWana Ismail, Gul Andaman, Shabbir Ahmad, and Saira Akhtar

10.14445/23939125/IJEMS-V5I9P102

How to Cite?

Nazia Tabasam, NorwazWana Ismail, Gul Andaman, Shabbir Ahmad, and Saira Akhtar, "Demand for Imported Crude Oil in Pakistan: NARDL Framework," SSRG International Journal of Economics and Management Studies, vol. 5,  no. 9, pp. ):9-16, 2018. Crossref, https://doi.org/10.14445/23939125/IJEMS-V5I9P102

Abstract:

This research article analyzes the long run relationship between real GDP growth rate and demand for imported crude oil in Pakistan assuming asymmetries. Annual time series data for quantity of imported crude oil, real GDP growth rate and price of imported crude oil are used from 1970 to 2014. Using Nonlinear Autoregressive Distributed Lag (NARDL) Model, the variables are found to be cointegrated. As theory predicts, demand for imported crude oil is relatively in-elastic and negatively related to its price. There is no evidence of non-linear or asymmetrical relationship between real GDP growth rate and demand for imported crude oil in the long run. However, dis-aggregation shows that negative changes in real GDP growth rate lead to a rise in the demand for imported crude oil while positive changes have no significant effect. The results suggest that even though local crude oil production is increasing, there is still a growing dependence on imported crude oil and thus, it is important to invest in local and alternative energy resources to revive the crumbling energy sector in Pakistan.

Keywords:

Energy demand, imported crude oil, Non-Linear Autoregressive Distributed Lags (NARDL), Pakistan economy

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