The Asymmetric Impact of Oil Price Shocks on Sectoral Returns in Pakistan: Evidence from the Non-Linear ARDL Approach

Basit Ali, Dilawar Khan, Muhammad Shafiq, Róbert Magda and Judit Oláh
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Basit Ali: Department of Economics, Kohat University of Science & Technology, Kohat 26000, Pakistan
Dilawar Khan: Department of Economics, Kohat University of Science & Technology, Kohat 26000, Pakistan
Muhammad Shafiq: Institute of Numerical Sciences, Kohat University of Science & Technology, Kohat 26000, Pakistan
Róbert Magda: Institute of Agricultural and Food Economics, Hungarian University of Agriculture and Life Sciences, 2100 Gödöllő, Hungary
Judit Oláh: Faculty of Economics and Business, University of Debrecen, 4032 Debrecen, Hungary

Economies, 2022, vol. 10, issue 2, 1-15

Abstract: This study explores the asymmetric impact of oil supply and demand shocks on the sectoral stock market returns of Pakistan. For this purpose, the study uses the non-linear autoregressive distributed lag (ARDL) approach based on monthly time series data for four sectors in the Pakistan Stock Exchange over the period 2005–2018. First, the findings of the unit root tests identified that all data series are stationary at first difference. Second, the F-bound test explored that oil supply and demand shocks have a cointegration relationship with sectoral stock market returns. Third, the study explored the asymmetric impact of oil supply shocks (OSS) and oil-specific demand shocks (OSDS) on sectoral returns of commercial banking and the symmetric impact of oil demand shocks (ODS) on sectoral returns of commercial banking. In addition, the asymmetric impact of oil supply shocks (OSS) and oil demand shocks (ODS) on sectoral returns of the power generation, chemical and fertilizer sectors was found. Moreover, the symmetric impact of oil-specific demand shocks (OSDS) on sectoral returns of the power generation, chemical and fertilizer sectors was explored. The study suggests important policy implications for policymakers and investors.

Keywords: oil price shocks; sectoral returns; Pakistan stock market; NARDL model; Pakistan (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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