How Is Volatility In Commodity Market Linked To Oil Price Shocks In Case Of Pakistan?
Author: Uzaima Qarni

Oil price increase has major micro and macro-economic effects on the economy as a whole. Unpredictability of oil prices can have serious consequences as it assumes an imperative part in the development of a nation. Oil price increase has a significant effect on oil importing countries as compared to oil exporting countries. Oil prices are thought to have direct effect on agriculture and metal commodities prices as oil is used as an input in production so change in oil prices can significantly affect the prices of these commodities. This study examines the relationship between oil, agriculture and metals commodity prices. we have used monthly data for the period of 2001:M7 to the first stage GARCH Model is applied to measure the volatility associated with the returns of all commodities .Beaulieu and Miron (1992) seasonal unit root test has been applied to test the time series properties. Oil, silver and gold prices are stationary at first difference, while the rest of the variables are stationary at level (wheat, sugar, tea, cooking oil). In order to measure the impacts of oil prices on agriculture and metal commodity prices, we have applied SVAR Model. Impulse response and variance decomposition are applied to measure the impact of oil prices on agriculture and metal commodity prices. The results of Impulse response function indicate that oil prices do not have Significant impact on wheat and tea prices whereas there is a slight increase in sugar and cooking oil prices following the oil price changes. In case of metals there is a slight increase in gold and silver prices following the oil price shocks. . Variance decomposition analysis also supports the findings based on impulse response functions. However the effects of oil price changes on various commodities is different. Supervisor:- Dr. Ahsan Ul Haq Satti

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Keywords : Commodity Market, Price Shocks
Supervisor: Ahsan ul Haq Satti

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