Catalyzing the Impact of High Cost of Living on Demand and Supply of Textile Industry A Prospective of Emerging Economy

Abstract

The high cost of living is unrestful for all economic agents. The shocks in the cost of living badly affect emerging economies like Pakistan. This study provides a novel analysis of the impact of “different types of living costs” on the demand and supply of the textile industry of Pakistan. It used the Structural Vector Autoregressive (SVAR) model to analyze the impact of the shocks in cost of living on textile industry demand and supply using monthly data from July 2008 to June 2020. The study's findings suggest that rising energy, housing, clothing, and footwear cost weaken demand for the textile sector, mostly through lower purchasing power. While education costs diminish supply, food costs raise producer price index, and transportation costs have no effect. Our findings contribute to the body of knowledge and give vital information on which types of living costs affect the textile sector and which might lead to improvement. The study's findings aid in the establishment of strategies for the textile industry's long-term viability and development. Furthermore, the study provides a novel insight that not all sorts of costs are detrimental to the textile industry.