Response of Macro Economic Indicators to Electricity Crisis and Circular Debt A Case Study of Pakistan
Author: Bushra Faizi

The thesis seeks to analyze the effect of electricity crisis and circular debt on macroeconomic indicators, namely, GDP, inflation rate and exchange rate. The analysis is based on monthly time series observations over the period of peak electricity crisis 2005-2013 in Pakistan economy. Two methods of estimation are used to test the two hypotheses of the study. SVAR results indicate that the electricity shortage causes inflation and currency depreciation in the short run, however, no significant short run impact was seen on economic output. The mediation results confirm that circular debt and electricity shortfall have significant correlation. The circular debt was found to completely mediate the relationship of electricity shortage and GDP, while partially mediates the relationship of electricity shortage with the inflation rate and exchange rate. In the light of the results, the possible suggestions are: firstly diversification of the energy mix, as the heavy import of oil to meet electricity needs, causes currency depreciation. Secondly, the inflation created by an electricity crisis could be controlled by proper planning and implementation of the tariff differential subsidy to cover up the increase in the cost of electricity. Institutions need to be built for rigorous monitoring to control the stock of circular a debt as it exacerbate electricity a crisis. Supervisor: Dr. Wasim Shahid Malik

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Keywords : Circular Debt, Electricity Crisis, Pakistan
Supervisor: Wasim Shahid Malik

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