Impact of Oil Prices on Economic Growth and Exports Earning: In the Case of Pakistan and India

The impact of oil prices on exports earnings and economic growth is investigated in the case of Pakistan and India by using the data from 1971 to 2009. The JJ cointegration and FMOLS methods are employed. The empirical findings indicate that the long run relationship exist among the variables in both countries cases. The oil prices (also squared term) is impeded the exports earning, and human capital, physical capital and economic growth are enhanced the exports earning, and in the second economic growth model, the human capital, physical capita and oil prices are economic growth enhancing factors in the case of Pakistan. On the other hand in the case of India human capital, physical capital and oil prices positively related to exports earnings whereas economic growth negatively related to exports earnings. The results of economic growth model indicate that only human capital and physical capital are positively related to economic growth.