Abstract
This paper examined the dynamic relation between crude oil
price, exchange rate and Karachi Meezan index (KMI-30) in
Pakistan over a period from 2009 to 2016 by using daily data in
order to capture a real time effects. The variables included in the
study were crude oil price (COP)USD per barrel, Exchange rate
(EX)PKR/USDandKMI-30. The study applied co-integration test,
Vector Autoregressive (VAR) model and lastly pairwise granger
causality test. Based on results no cointegration was found
among COP, EX and KMI-30 index. VAR model undertaken with
lag five of the dependent and independent variables as suggested
by AIC lag criterion method. The result showed one to four
period lagged variables of KMI-30 Index(-1,-2,-3,-4) having
significant positive effect on KMI-30 index while lagged five of
KMI-30 Index(-5) have insignificant relationship with KMI-30
Index. The one period lagged variables of COP (-1) have
significant positive effect on KMI-30 Index while lag five of COP
(-5) have significant negative relation. The two, three and four
period lagged variables of COP (-2,-3,-4) have insignificant
effect on KMI-30 Index. The one, two, three, four and five lags
of EX (-1,-2,-3,-4,-5) has insignificant relationship with KMI-30
Index. Granger causality test showed that COP granger caused
KMI-30 Index while Karachi KMI-30 Index granger causes EX
in short run. Hence, in long run oil price shocks do not affect
KMI-30 Index while in short run oil price affect KMI-30 Index.
Hamid Ullah, Sami Ullah, Saima Urooge, Sarfaraz Ali, Shams Ur Rahman. (2019) Dynamic Interaction Between Oil Price, Exchange Rate And Kmi-30 Index: Evidence From Pakistan, Journal of Managerial Sciences, Volume 13, Issue 2.
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