The Impact of Oil Price Changes on Inflation in Pakistan

Afia Malik

Abstract


Oil prices have fluctuated enormously in recent years. Strong volatility in oil prices has serious implications for Pakistan’s economy given its substantial dependence on imported fuels. Energy prices have a crucial role behind inflation rates in Pakistan and it is proved in this study. We estimate the effects of oil price changes on inflation for Pakistan using an augmented Phillips curve framework. Our results suggest a strong oil price-inflation relationship, especially when oil prices are rising continuously over the past one year.

Keywords: Oil Prices, Inflation, Pakistan.

JEL Classifications: E31, Q43


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