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Role of Education Mismatch in Shaping Earning Outcomes Across Different Employment Status in Pakistan
Henna Ahsan
Published:July-Dec 2024
This study contributes to the literature that highlights the penalties of education-occupation mismatch in terms of earnings across different employment statuses. Most existing literature analyzing the education-occupation mismatch has focused on paid employees, overlooking self-employed individuals, and has not controlled for sample selection bias and unobserved heterogeneity bias simultaneously. Therefore, the objective of this study is to analyze the impact of education mismatch on earnings across different employment statuses after correcting for both sample selection bias and unobserved heterogeneity bias. To achieve this objective, we applied the methodology of Duncan and Hoffman (1981) to the Pakistan Social and Living Standards Measurement (PSLM), 2019-20. Our results show that after controlling for unobserved heterogeneity bias and sample selection bias, overeducation has no positive value for both paid employees and the self-employed. The returns from overeducation based on the OLS model might be overestimated if overeducated workers possess lower average ability levels, whereas the returns of adequately educated individuals increase after correcting for the bias and are significantly higher for self-employed individuals compared to paid employees.
KEYWORDS:
Education mismatch, earnings, labor market, sample selection bias, unobserved heterogeneity bias..
JEL: E20, I20.
Effectiveness of Monetary Policy in Controlling Inflation in Pakistan in the Presence of Positive and Negative Oil Price Changes
Habib-Ur-Rehman and Eatzaz Ahmed
Published:July-Dec 2024
This study evaluates the effectiveness of monetary policy in controlling inflation in Pakistan. Using quarterly data from 1980 to 2022, the study finds that the policy rate is either an ineffective or counterproductive instrument, while the monetary base serves as an effective tool for controlling inflation. Significant evidence is found against the view that monetary policy is ineffective in controlling inflation in the presence of inflationary cost-push shocks. The study also finds that the effectiveness of monetary policy is asymmetric in combating inflation during inflationary and anti-inflationary oil price shocks. Despite these observations, the study recommends a cautious approach based on additional research involving diverse tools and experimentation with a gradual mixing of instruments.
KEYWORDS:
Monetary policy, effectiveness.
JEL: E52, E58.
Impact of Efficiency-Seeking FDI on Pakistan’s Macroeconomy: A Sectoral CGE Analysis
Jazib Mumtaz and Sayed Irshad Hussain
Published:July-Dec 2024
The study examines the impact of foreign direct investment (FDI) inflows on Pakistan's macroeconomic framework, emphasizing improved capital efficiency and technological advancements. Utilizing a Computable General Equilibrium (CGE) model within the GTAP framework, it evaluates the effects of technology-driven FDI on key sectors, including manufacturing, exports, and demandoriented industries. Key findings indicate that priority sectors such as food and beverages, light manufacturing, and heavy manufacturing experience the highest GDP growth from FDI-induced technological upgrades. Sectors like light manufacturing, metals, textiles, and heavy manufacturing demonstrate significant export increases and reduced reliance on imports. Conversely, demand-oriented sectors such as communication and retail trade drive higher imports. Manufacturing and exportoriented sectors help reduce the trade deficit, while retail trade, communication, and financial services contribute to its increase. The study concludes that attracting FDI to manufacturing and export-driven sectors is crucial. However, foreign investors tend to focus on market-seeking sectors. To encourage efficiency-seeking FDI in productive sectors, the government should enhance the business environment, lower costs, deregulate, and ensure a level playing field.
KEYWORDS:
Efficiency-seeking FDI, general equilibrium, market-seeking FDI..
JEL: C32, E31, E43, Q31, Q43.
Do Digitalization and Innovation Accelerate Productivity? A Comparative Analysis of Four Asian Countries
Muhammad Adnan Khan ,Muhammad Azam Khan and Muhammad Tariq
Published:July-Dec 2024
Productivity growth has remained slow in Asian countries. The study examines the impact of digitalization and innovation on output productivity in four Asian countries: China, India, Bangladesh, and Pakistan, using data from 1990 to 2022. The panel autoregressive distributed lag (ARDL) model was employed to investigate the long-run relationship between the variables. The study implements the Fully Modified OLS (FMOLS) method for robustness checks. The long-run results show that digitalization and innovation have a positive and significant impact on productivity in each country. Human capital, foreign direct investment (FDI), and trade openness also have a significant impact on productivity. The panel ARDL result shows that digitalization, innovation, human capital, trade openness, and FDI significantly affect productivity in the long run. The study recommends encouraging investments in digital infrastructure, inventions, and innovations across various economic sectors, including R&D activities, fostering industry-academia collaborations, and technological advancements. These countries should also invest in education, technical, and vocational training to improve labor productivity and efficiency.
KEYWORDS:
Productivity, innovation, digitalization, human capital, FDI, panel ARDL..
JEL: 03, 04, C23, O53.
Asymmetric Effect of Oil Prices on Inflation in Pakistan using a NARDL Econometric Approach
Poonam Riaz and Saghir Pervaiz Ghauri
Published:July-Dec 2024
This study investigates the impact of oil price fluctuations on inflation in Pakistan, focusing specifically on asymmetric effects. Employing the Nonlinear Autoregressive Distributed Lag (NARDL) model, it examines how oil price increases and decreases influence inflation differently. Using secondary annual data from the Pakistan Bureau of Statistics and the State Bank of Pakistan, the study considers the Consumer Price Index (CPI) as the dependent variable, while independent variables include domestic oil prices (LOP), exchange rate (LEXH), interest rate (LINTR), and unemployment rate (LUNEMP). The Augmented Dickey-Fuller (ADF) test assesses stationarity, revealing mixed integration orders (I(0) and I(1)), which justifies the application of the Autoregressive Distributed Lag (ARDL) model to explore both long-run and short-run relationships. The ARDL bounds test confirms the presence of a long-run relationship among the variables. Results indicate that oil prices significantly affect inflation, with past oil prices exhibiting a persistent impact. The NARDL model highlights asymmetry, showing that oil price increases (LOP_POS) exert a stronger positive effect on inflation than decreases (LOP_NEG). Exchange rate fluctuations display mixed effects, with lagged depreciation negatively influencing inflation, while interest rates and unemployment rates do not demonstrate statistically significant longrun effects. Diagnostic tests, including normality, serial correlation (Breusch-Godfrey LM test), and heteroskedasticity (Harvey, White, and Glejser tests), confirm the model's validity. These findings offer key insights for policymakers, underscoring the necessity of targeted interventions in response to oil price shocks. Given the asymmetric effects, monetary authorities should implement differentiated strategies for oil price increases and decreases to manage inflation effectively. Additionally, exchange rate stability plays a crucial role in mitigating inflationary pressures. Future research may expand on this study by incorporating additional macroeconomic variables or employing alternative econometric approaches to enhance inflation modeling in developing economies like Pakistan.
KEYWORDS:
Oil prices, Inflation, ARDL model Asymmetric effects, NARDL model, Exchange rate, Interest rate, Unemployment, Pakistan economy, monetary policy..
JEL: 03, 04, C23, O53.
Fiscally Sustainable Pensions in Pakistan
Mahmood Khalid, Naseem Faraz and Aisha Irum
Published:July- Dec 2023
Public sector employment remains attractive for important reasons such as job
security and a guaranteed pension. Evaluating alternate pension systems has gained
importance among policymakers concerned about the aging population and rising poverty
levels. Pakistan has a Pay-As-You-Go type pension system, financed by taxpayers’ money,
and has resulted in the building up of unfunded liability for the government. The
expenditures on superannuation are gradually coming into mainstream discussions on fiscal
sustainability and public finance management. These additional expenditure liabilities
require an increase in future taxes to be solvent. We use scenario-based projections to
highlight how the existing pension system is fiscally unsustainable and what approaches are
needed to make it sustainable.
KEYWORDS:
Fiscal policy, public economics, public finance, tax-induced, pensions..
JEL: H3, E620.
Navigating the Economic Landscape in the Asian Pacific: A Study of Climate, Security, and Economic Spillovers across Stock Markets
Qingmei Tan, Muhammad Haroon Rasheed, Muhammad Shahid Rasheed and Kamran Ali
Published:July- Dec 2023
The Asian Pacific region is spearheading the post-pandemic economic revival, and
exploring regional dynamics is becoming increasingly relevant for researchers. In this regard,
stock markets have always profoundly influenced a country's economic health, and its behavior
varies significantly globally. This indicates stock markets' contextualized nature and response
to varying incoming information. Therefore, the study examines the interplay of behavioral and
developmental factors in selected stock markets from South Asia. This study draws upon data
from 2014 to 2023 and utilizes VAR-based connectedness models to analyze the dynamics of
stock market connectedness in the region. This study also considers the influence of pertinent
regional climate, security, and economic challenges on stock market behavior. The findings
indicate the presence of moderate spillovers among stock markets and from economic,
environmental, and security information. Further, most of this spillover is attributed to the
markets in developed nations and the economic news sentiments, while climate information's
contagion is increasingly becoming relevant. These findings explain the intricate dynamics of
these pertinent variables, significantly adding to the understanding of the region.
KEYWORDS:
South Asia, stock markets, spillover, sustainability, terrorism, sentiments.
JEL: E44, F21, G14, O11, O44.
Rethinking Food Insecurity Assessment Methods: Evidence from Khyber Pakhtunkhwa, Pakistan
Mohsin Khan and Zhang Yanxia
Published:July- Dec 2023
This study evaluates three standard food insecurity measures—Household Food Insecurity Access Scale (HFIAS), Food Consumption Score (FCS), and Minimum Dietary Energy Intake Requirement (MDER)—using survey data from 300 individuals in Bannu and Dera Ismail Khan districts in Khyber Pakhtunkhwa, Pakistan. We find a strong correlation (p < 0.01) between FCS and MDER (ρ = 0.93), indicating alignment in assessing dietary energy sufficiency. In contrast, correlations between FCS and HFIAS (ρ = 0.087) and between MDER and HFIAS (ρ = 0.079) are weak, suggesting that HFIAS captures different dimensions of food insecurity. Comparative analysis reveals that FCS and MDER often indicate more severe food insecurity than HFIAS. Bannu consistently shows higher severe food insecurity rates than Dera Ismail Khan, with ANOVA results confirming significant district differences (F = 76.14 for MDER, p = 0.000002; F = 129.1 for FCS, p = 0.00002; F = 11.85 for HFIAS, p = 0.000658). Vulnerable groups, including daily wage households, Internally Displaced Persons (IDPs), and female-headed households, exhibit higher rates of food insecurity. These disparities arise from methodological inconsistencies and the subjective nature of self-reported measures, highlighting the need for accurate measurement through comprehensive surveys to effectively understand the full extent of food insecurity.
KEYWORDS:
Food insecurity, internally displaced persons, female-headed households, Food Consumption Score (FCS), Household Food Insecurity Access Scale (HFIAS),Minimum Dietary Energy Intake Requirement (MDER)..
JEL: Q18, C83, O13, D12.
A Regional Analysis of Poverty in Pakistan: Trends and Decomposition
Inza Murtaza,Husnain Ali and Muhammad Idrees
Published:July- Dec 2023
This study conducted a regional analysis of poverty in Pakistan with a particular focus on trends and decomposition. Nine Household Integrated Economic Survey rounds were used in this study from 2001-02 to 2018-19. This study estimated poverty using time series data from all the regions and provinces of Pakistan. The unit of wellbeing used in the study is consumption, and the unit of analysis used is the adult equivalent. Our results show that the poverty rate decreased in all regions and provinces over the analysis period. Poverty rates decreased in all regions from 2001-02 to 2010-11. The decomposition shows that the highest population share is found in Punjab, but it has the lowest poverty share. At the same time, Baluchistan has the lowest population share and the highest poverty share. KPK and Sindh have half of their population below the poverty level. Results show that urban poverty share is higher overall than rural poverty share.
KEYWORDS:
Poverty, distribution, trends, decomposition, poverty line..
JEL: I32.
Are Consumer Expectations Forward-Looking: A Case for Pakistan
Assistant Director, Research Department, State Bank of Pakistan
Published:July- Dec 2023
We have used the Dynamic Time Warping (DTW) algorithm to calculate the forward-looking consumer inflation expectation forward-lookingness. We have used DTW instead of widely used parametric techniques as this algorithm does not require specific assumptions relating to time series data. The results suggest that expectations are more backward-looking from 2012 to 2022. Furthermore, we examined consumers' response to the exchange rate regime shift and found evidence of consumers becoming more forwardlooking due to the deliberate change in policy stance from fixed to managed float. This suggests that changes in economic policy can directly impact the consumer's expectations formation process.
KEYWORDS:
Consumers, inflation, inflation expectations..
JEL: C63, F31.
Sustainable Development and Women’s Personal Empowerment for Becoming Socially Inclusive: A Study from the Informal Sector in Lahore, Pakistan
Haifa Asif, Sana Fayyaz
Published:Jan- June 2023
Women employed in informal sectors are integral to a nation’s overall economic growth, and to better development outcomes. This study aims to examine the capabilities of these women not only in terms of personal empowerment, but in the context of sustainable development via social inclusion. Previous studies have only focused on microcredit as a “magic wand” for increasing women's empowerment and their standard of living, without the inclusion of feminist theory. The inclusion of feminist theory and social inclusion in the discussion concerning the provision of financial support to women in Pakistan, allows us to properly examine the role of sustainable development and women's empowerment in Pakistan. This study is quantitative and descriptive. Using a survey questionnaire on the cross sectional data source, the 118 women borrowers of Lahore, Pakistan, have been investigated by stratified random sampling technique. The Multinomial logit and Probit regression models have been used for data analysis. The study's results supported the actuality that women need to be financially and personally empowered, in order to benefit from greater social inclusion.
KEYWORDS:
Social inclusion,
sustainable development,
microfinance,
women's personal empowerment,
informal sector.
JEL: O40, O17.
The Impact of Services Quality on Electricity Theft Reduction: An Empirical Analysis of Electricity Distribution Utilities in Pakistan
Iqra Mushtaq, Faisal Mehmood Mirza
Published:Jan- June 2023
This study investigates the socioeconomic, administrative, and service quality determinants of electricity theft in Pakistan. The effect of service quality standards on electricity theft is estimated using panel data from eight electricity distribution utilities from 2006 to 2018. The results of utilizing the One-step system Generalized Method of Moments estimator confirm the statistically significant impact of social, administrative, and service quality variables on the illegal use of electricity. Based on the findings, Pakistan's National Electric Power Regulatory Authority is advised to take measures to improve the quality of services. In contrast, the nation’s Central Power Purchasing Agency is advised to improve administrative structure by separating retail function from distribution by electric distribution.
KEYWORDS:
Pakistan,
Electricity theft,
Distribution utilities;,
Service quality.
JEL: C33, O14.
Published:Jan- June 2023
This study examines the uncertainty of consumer inflation expectations in Pakistan using the data collected by the State Bank of Pakistan (SBP) through the Consumer Confidence Survey (CCS). CCS has been conducted every second month since January 2012. The research employs round numbers to calculate inflation expectation uncertainty and finds it countercyclical and positively correlated with inflation. Further, it also displays a weakly positive correlation with inflation disagreement, inflation volatility, and the Economic Policy Uncertainty (EPU) index. The study also reveals that inflation expectation uncertainty is higher for female, less educated, and young respondents compared to businessmen, males, older people, and educated. The study suggests asymmetric behavior of inflation expectations uncertainty for high and low inflation levels, where uncertainty is high when inflation is high. The study also suggests that inflation uncertainty is significantly related to food inflation. Lastly, the study establishes that inflation expectation uncertainty affects the consumption of durable goods by influencing consumer spending attitudes.
KEYWORDS:
uncertainty,
environmental resources,
Inflation Expectations,
Consumer.
JEL: E31, D18.
Easydata-MD: A Monthly Dataset for Macroeconomic Research on Pakistan
Ateeb Akhter Shah Syed, Hassan Raza, Mohsin Waheed
Published:Jan- June 2023
This paper introduces the monthly State Bank of Pakistan’s EasyData, for conducting empirical macroeconomic analysis and forecasting for Pakistan's economy. For this purpose. We perform a forecasting exercise using the conventional econometric models and the most recent machine-learning algorithms. We find that the machine-learning models outperform the benchmark and regression models based on observed factors. Furthermore, the dataset has a higher ability to predict the external variables, a possible outcome of Pakistan's economy and its persistent balance of payment problem. The focus of policy has been to address this issue.
KEYWORDS:
Pakistan,
forecasting,
EasyData,
factors,
machine learning,
machine-learning.
JEL: F47, C55.
How did Supply and Demand Shocks Affect Industries and Occupations in COVID-19? Evidence from Pakistan
Muhammad Zubair Mumtaz, Zachary A. Smith
Published:Jan- June 2023
This study examines the supply and demand shocks in Pakistan that affected occupations and industries during the COVID-19 pandemic. We use the remote labor index and essential scores for undertaking work activities from home across occupations proposed by del Rio-Chanona et al. (2020). To estimate demand shocks, we follow del Rio-Chanona et al. (2020), who employed estimates from the US Congressional Budget Office (2006) that attempted to forecast how the US economy would be affected at the industry level if a severe influenza epidemic occurred. We document that demand shocks most significantly affect the transport and food services industries. In contrast, the manufacturing, mining and quarrying, and handicraft and printing industries are likely to be impacted by supply shocks. Food services and restaurants experience a bigger combined shock. Relative to the pre-pandemic period, aggregate shocks suggest a decrease in the output of Pakistan’s economy by one-fifth if the pandemic were to seriously affect the economy, threatening 21 percent of jobs and lowering total wage income by 18 percent. Considering a second wave and a new variant of coronavirus, we estimate that aggregate shocks may continue, and the economy's output could deteriorate by one-fourth if the region experiences a significant outbreak. Finally, we compare our findings with the US economy and find differences between supply and demand shocks in both economies.
KEYWORDS:
wages,
financing shocks,
value-added,
COVID-19,
employment.
JEL: J21, O49, I15.
Published:Winter 2022
Compensation structures of public sector employees have significant implications
for public service delivery and employment. If public sector employees get relatively lower
pay, then the government can face difficulties in retaining trained and qualified workers.
However, if public sector employees receive higher salaries it is possible that younger
people may prefer to join the public sector. If this is accompanied by limited job absorption
capacity in the public sector, it is possible for there to be substantial unemployment. This
study has analysed the wage differentials by using the data from the Pakistan Labour Force
Survey 2020-21. Blinder-Oaxaca decomposition suggests that at the executive level, public
sector workers are facing wage penalties, while other occupational groups in the public
sector are enjoying wage premiums. The highest wage premiums are for clerical staff
followed by unskilled workers, services, technician, professionals and agricultural workers.
KEYWORDS:
public sector,
private sector,
wages,
employment.
JEL: H3, E620, J31, J45, L32.
Pakistan's Development Dilemma: An Empirical Analysis of Aid, Governance, and Human Development
Kalsoom Zulfiqar, Abdul Rehman Nawaz, Madiha Qayyum, Faisal Asghar
Published:Winter 2022
This study examines the role of foreign aid and governance in Pakistan’s human
development from 1991 to 2021 utilizing the autoregressive distributed lag (ARDL) technique. It not only explores the individual impact of foreign aid and governance but also
investigates how good governance affects human development. A governance indicator has
been constructed by employing Principal Component Analysis based on six different governance dimensions. It is found that both good governance and foreign aid have significant
and positive relationships with human development in Pakistan and good governance facilitates and reinforces the contribution of foreign aid in advancing human development.
The results show that trade openness, income growth, and government expenditure also
have a positive impact on human development. The Granger Causality test further verifies
the causality running from foreign aid and governance to human development. The analysis
implies that enhancing governance quality is important to optimizing the positive impact of
foreign aid on human development. Likewise, policies to stimulate trade openness, boost
government expenditure on social sectors, and more consistent income growth can play an
important role in improving human development in Pakistan.
KEYWORDS:
Aid,
Governance,
Development.
JEL: F35, O1, D73.
An Empirical Analysis of the Prices of Selected Food Items Across Three Political administrations in Pakistan
Nehal Ahmad Khan, Anwar Shah
Published:Winter 2022
This study compares the prices of selected food items across three political administrations in Pakistan. We have taken monthly data from July 2008 to October 2021 of the
prices of selected food items from the Pakistan Bureau of Statistics, the Ministry of Finance
(Pakistan)’s Pakistan Economic Survey, and Index Mundi. Thirteen food items were selected: Wheat, Basmati Rice, Basmati Super Rice, Basmati Broken Rice, Sindh/Punjab Rice,
Tinned Vegetable Ghee, Loose Vegetable Ghee, Whole Masoor Pulse, Washed Masoor
Pulse, Washed Mong Pulse, Washed Mash Pulse, Gram Pulse and Refined Sugar. We theorize that an increase in prices will be independent of changes in political administration, as
prices are determined purely based on economic factors in the market. We provide graphical and regression analysis, with our study pointing to a consecutive rise in the absolute
price of selected food items across all three administrations. Increasing real prices of selected
food items are specific to each administration.
KEYWORDS:
Political administration,
selected food items,
nominal prices,
real prices,
food inflation,
ARDL model.
JEL: Q11, L66, N70.
Examining the Trade Determinants and Potential of Pakistan: A Gravity Model Analysis
Suadat Hussain Wani, M. Afzal Mir
Published:Winter 2022
This study aims at identifying the main determinants of the annual trade flows of
Pakistan with its top trade partners, including those with which the country has signed
trade agreements. Given the present economic conditions of the country, it is important to
identify the main determinants of trade so that the country can benefit from trade openness
around the world. In addition to identifying trade determinants, the impact of adherence to
a particular trade agreement was also examined. The results indicate that FTA signed by
Pakistan with China and other trade partners has created trade opportunities for
participating countries, highlighting the importance of trade liberalization for the long-run
development of the country. Besides, the trade potential of Pakistan with selected trade
partners has also been estimated.
KEYWORDS:
Pakistan,
gravity model,
panel data,
total trade,
trade potential.
JEL: C23, P45, F10.
Unlocking Markets: Assessing Pakistan’s Trade Potential with Gulf Cooperation Council Members
Wajid Islam, Junaid Ahmed, Amjad Masood
Published:Winter 2022
This study examines the trade potential of Pakistan with the countries of the
Gulf Cooperation Council (GCC). Trade potential is estimated using the RCA (Revealed
Comparative Advantage) index technique, utilizing HS-8 tariff line level data from 2007
to 2021. Our findings identify 102 products at the tariff line where Pakistan enjoys a
comparative advantage. These products span various sectors, including copper, iron,
steel, minerals, wood, pharmaceutical, paper, tobacco, sugar, and plastic. Furthermore,
the paper discusses the trade hindering effect of factors such as the absence of effective
trade agreements, shortage and high energy prices, and other high input costs.
KEYWORDS:
Trade potential,
Pakistan,
Gulf Cooperation Council,
HS-8,
revealed comparative advantage.
JEL: F10, C61.