IMPACT OF COVID-19 PANDEMIC ON OIL PRICES IN SOUTH ASIA: PANEL DATA ANALYSIS

Abstract

The COVID-19 pandemic has exerted an unprecedented impact on the oil prices across the globe and it is inevitable to capture the variations in oil prices caused by the COVID-19 pandemic. The current study objects to explore the effect of COVID-19 on oil prices in South Asian countries (Pakistan, India, Sri Lanka, and Bangladesh) by applying the Fixed-Effect Model (FEM) to the panel data from January 2019 to June 2021. The study has applied the Levin-Lin Chu test, Hardri LM test, and Im-Pesaran-Shin test to check the stationary properties of the panel data. The study has also applied the diagnostic tests i.e. White test, the Breush-Pagan test, the Breush-Pagan LM test, the Durban-Watson test, and the Hausman test. The results of all diagnostic tests authenticate the estimates of the Fixed-Effect Model (FEM). Findings of the study exhibit that the COVID-19 pandemic, natural gas production, and oil demand exert a negative impact on the oil price, whereas, exchange rate and oil supply have a positive impact on oil prices in South Asian countries during the stipulated period. The study has suggested that the authorities of South Asian authorities should devise such type of policies that could defeat the COVID-19 pandemic to cope with the hike in oil prices. Keywords: COVID-19 pandemic; Oil Prices; Fixed-Effect-Model; South Asia.