Quantitative Analysis of Long-term Dynamic Relationships between Crude Oil, gold, exchange rates, and stock prices: An Auto Regressive Distributive Lag Approach in Pakistan

Abstract

Since crude oil is Pakistan's main source of imports, the current study empirically investigates the long-term dynamic relationships between changes in international price of crude oil and gold on macroeconomic indicators, particularly the exchange rate and stock market index. Therefore, international oil prices, Brent oil prices are used as a proxy which were obtained from Federal Reserve Economic Data (FRED) database, gold spot prices data were acquired from World Gold Council website, stock market index, KSE-100 index was used as a proxy and the data was collected from Investing.com website, and the data for exchange rate for Pakistani rupee against US Dollar (PKR/USD) was obtained from Investing.com. The sample period included in this study is from the year 2000 to 2021.  The paper employs the Auto regressive Distributive Lag (ARDL) technique to analyze the dynamic relationships among the variables. Findings suggest ARDL has been useful in capturing the long-run relationship i.e., crude oil and gold international prices are significant variables and have impact on stock market and exchange rate.