Commodity Price Shocks and Industrial Production of Pakistan

Abstract

Purpose - Several studies are available on the impact of energy prices on the overall economy and industrial output of Pakistan. However, there is no valuable work that has examined the impact of different groups of commodity prices on industrial output. This study is aimed to fills-in this gap and examine the impact of seven groups of commodities on the industrial output of Pakistan.

Design/methodology/approach - It uses the Structural Vector Autoregression model for monthly data from July 2008 to June 2020.

Findings - The finding of our study suggests that food, education and clothing, and footwear price shocks have a negative and significant impact on industrial output. Whereas, the oil and transportation price shocks have a negative impact. The findings of this study may help policymakers to control the commodity prices that have a dominant-negative impact and provide insight that all commodity price shocks are not alike for the industrial output of Pakistan.

Originality/value - This study contributes significantly to the topic under consideration and provides new insight that not all commodity price shocks are identical. Oil is no doubt the main source of energy. However, many other types of commodities significantly affect the industrial production of Pakistan. This study is the first attempt to highlight the impact of seven groups of commodity prices and provide evidence that these commodity prices significantly affect the industrial production of Pakistan.