This study utilizes interim multipliers analysis based on a VAR-X model to investigate the impacts of changes in the world’s crude oil prices on output growth rates, inflation rates, real exchange rates, and real interest rates in Pakistan. The study finds that following oil price inflation, the output growth rate initially increases but then declines in the medium to long run. The effects of oil price deflation on output growth are the opposite, though smaller in magnitude. Oil price inflation is also found to cause a moderate increase in the overall inflation rate, while oil price deflation reduces the inflation rate by a smaller margin. The resilience of the economy to oil price changes is attributed to the low share of oil in production costs, subsidized oil prices by Middle Eastern countries, remittance inflows from workers in the Gulf States, and the managed exchange rate regime. The study recommends the continuation of a conservative monetary policy, the development of inter-provincial political consensus on major hydro projects, and the ensuring of the credibility of fiscal measures aimed at the solarization of the economy, focusing more on long-term considerations rather than short-term budgetary compulsions.
KEYWORDS: Oil Price, Output, Inflation, Standard-VAR, Interim-Multiplier.
JEL: C32, E31, E43, Q31, Q43.

The purpose of this paper is to determine whether the information content in the consumer confidence index explains demand in Pakistan, beyond economic fundamentals. We use a wide range of models, starting from ordinary least squares to linear regression models that incorporate common factors driven by principal components, as well as advanced machine learning techniques, including penalized regression methods and neural networks. We apply both fixed and expanding window rolling forecasts to test this phenomenon and present our results using three forecast accuracy measures. Overall, our findings demonstrate that, for each technique considered, the model that includes the consumer confidence information set outperforms the model based solely on economic fundamentals. This indicates that the information content of consumer confidence enhances the explanation of demand-side indicators in Pakistan. This paper directly informs policymakers in developing countries generally, and in Pakistan specifically, that the consumer confidence index offers insights into the expectations of economic agents and should be integrated into analyses for improved policy decisions.
KEYWORDS: Consumer Confidence; Forecast, Machine Learning, OLS; Pakistan.
JEL: C22, C80, E00.

The exchange rate is an important tool for enhancing exports in emerging economies. To quantify the role of the exchange rate in determining trade in Pakistan, this paper presents estimates of the elasticities of relative prices, demand, and exchange rates across various categories of export and import demand for Pakistan’s economy. Our results indicate that the exports of manufactured and intermediate inputs are more responsive to changes in relative prices and exchange rates than the exports of primary goods. Furthermore, the higher magnitude of the elasticity of exports with respect to foreign demand suggests that Pakistan's exports are more responsive to foreign demand. Regarding import demand functions, our results show that the exchange rate plays an important role in impacting the demand for primary and manufactured goods imports, while domestic income drives the demand for intermediate goods imports. Overall, the exchange rate and foreign demand have played a significant role in enhancing exports in Pakistan.
KEYWORDS: Exports, imports, elasticities, exchange rate, relative prices, external demand, domestic demand, Pakistan.
JEL: F11, F14, F17, F19.

This study explores the connection between financial inclusion and inclusive growth, highlighting the pressing need for such growth in contemporary Pakistan alongside the ongoing efforts to enhance financial inclusion levels. Utilizing a time series dataset from 2004 to 2022, we investigate variables including the index of inclusive growth, the composite index of financial inclusion, FDI, budget deficit, remittances, and government effectiveness. The analysis employs the Markov regime-switching technique to address the non-linearity of the data. Findings indicate a non-linear relationship between inclusive growth and financial inclusion. Financial inclusion has a significant and positive effect on inclusive growth during low-growth periods but exhibits negative effects during high-growth periods. Government effectiveness consistently demonstrates a positive impact across both high and low-growth phases, with a more pronounced effect during low-growth periods. Remittances negatively influence growth, while FDI and budget deficit show significant positive effects during low-growth periods. Key recommendations include enhancing rural financial access and digital literacy during low-growth phases, addressing structural and regulatory inefficiencies during high-growth periods, and integrating Islamic finance into national strategies. Strengthening governance and periodically reviewing policies to align with evolving economic conditions are also vital for achieving sustained and equitable development.
KEYWORDS: Inclusive Growth, Financial Inclusion, Regime Switching.
JEL: O11, O16.

This study narrates the history of trade liberalization in Pakistan from 1972 to 2021. It outlines the history of trade reforms, which is divided into three distinct periods: the partial trade liberalization period from 1972 to 1987, the trade liberalization period from 1988 to 2004, and the post-liberalization period from 2005 to 2021. Existing studies of trade liberalization often overlook the underlying explanations, which frequently fall within the realm of history and interests. This paper addresses that gap and discusses the significance of domestic and international political economy factors leading up to trade liberalization. In Pakistan, trade liberalization did not coincide with compensatory real devaluation of the currency, as the exchange rate policy prioritized price stabilization. Consequently, domestic policy rates remained high, resulting in an overvaluation of the currency, which significantly reduced the rate of capital accumulation. The consumption-driven trade liberalization contributed to the phenomenon of premature deindustrialization. As a result, the country experienced low economic growth.
KEYWORDS: Deindustrialization, Protectionism, Tariff, Liberalization, Globalization.
JEL: C63, F31.

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.

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.

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.

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.

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.