Abstract
In this research we are interested to investigate the presence of asymmetries in the long run and short run relationship between Pakistan oil prices and a set of major determinants of oil prices namely, Saudi oil production, world oil production, exchange rate and spread.We use nonlinear autoregressive distributed lag (NARDL) bounds testing approach that allows possible asymmetric effect in both short and long run. Results provide the evidence of asymmetries in both short and long run relationship among Pakistan oil prices and determinants under consideration. Considering the importance of asymmetric non-linearity in this context, it is shown that exchange rate bears more, a moderate of world oil production and Saudi oil production and up-to a lesser extent spread constitute an important determinant of Pakistan oil prices.Our findings have relevant implications for investors, speculators and particularly for policy makers of Pakistan’s economy.
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