Impact of Exchange Rate and Oil Prices on Inflation in Pakistan
Keywords:Inflation, Co-Integration, Stationarity, Unit Root
This study investigates the impact of Exchange Rate (Rupees Vs US $) and oil prices (Pak. Petroleum) and on the inflation rate in Pakistan by applying the Co-Integration technique to the monthly data for all the three series ranging from January 2004 to January 2019. Unit root testing results provide strong statistical evidence for each of the series to be non-stationary at the level and stationary at first difference. Co-integration testing results confirm the existence of Cointegration among the selected time series. Moreover, the empirical results of the regression of inflation on the exchange rate and oil price also lead to conclude that both the series have a strong statistical significant impact on inflation in Pakistan.
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