Impact of external shocks : analyzing economic impact on economy

Abstract EN

The purpose of the research is to know the impact of external shocks on the developing economy of Pakistan.

Regression Analysis has been applied through Statistical tool e.g.

E-Views.

Data has been collected from State Bank of Pakistan and Pakistan Bureau of Statistics.

Authors identified that Consumer Price Index and Terms of Trade have impact on the economy of Pakistan.

Their significance has amplified with the increase in time.

To the Economy of Pakistan, the primary external shock is Terms of Trade.

It shows a negative relationship with the GDP.

Foreign GDP has very limited impact.

Keeping other external shocks constant, Consumer Price Index also shows vulnerability with GDP and has positive relationship.

There is absence of shock ability to GDP in Real Effective Exchange Rate, Foreign GDP and Foreign Remittances.

However, results concluded that Terms of Trade and Consumer Price Index can destabilize the economy of Pakistan.