Ahmad, Maaz e al.
A icle
E ec o he supply-side ac o s on in la ion in Sou h Asia:
An analysis o oil p ice, echnology, and labo ma ke
dynamics
Resea ch in Globaliza ion
P o ided in Coope a ion wi h:
Else ie
Sugges ed Ci a ion: Ahmad, Maaz e al. (2024) : E ec o he supply-side ac o s on in la ion in Sou h
Asia: An analysis o oil p ice, echnology, and labo ma ke dynamics, Resea ch in Globaliza ion,
ISSN 2590-051X, Else ie , Ams e dam, Vol. 8, pp. 1-7,
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E ec o he Supply-Side ac o s on in la ion in Sou h Asia: An analysis o
oil p ice, echnology, and labo ma ke dynamics
Maaz Ahmad
a
,
b
,
*
, Zebo Kuldashe a
a
, Nilu a Ismailo a
a
, Muhammad Eid Balbaa
a
,
Nazoka Ak amo a
c
, Noo Ul Ain
d
a
Wo ld Economy Depa men , Tashken S a e Uni e si y o Economics, Tashken 100003, Uzbekis an
b
Uni e si y o Tashken o Applied Sciences, S . Ga ha 1, Tashken 100149, Uzbekis an
c
Depa men o Business Adminis a ion, Tashken S a e Uni e si y o Economics, Tashken 100003, Uzbekis an
d
School o Economics, Quaid-i-Azam Uni e si y, Islamabad, Pakis an
ARTICLE INFO
Keywo ds:
Cos -push in la ion
Labo ma ke dynamics
Ene gy p ices
Technological inno a ions
ABSTRACT
As a long-las ing and ongoing economic p oblem, in la ion signi ican ly a ec s how socie y iews socioeconomic
conce ns and how people go abou li ing hei daily li es. Fo Sou h Asian economies, in la ion is no only a
hypo he ical economic concep ; i is a b u al eali y ha a ec s hei capaci y o pay o necessi ies. The e o e,
his s udy examines he e ec s o oil p ices, echnological ad ances, and labo ma ke dynamics on in la ion
using he Panel ARDL on a subse o Sou h Asian coun ies o e he yea s 1995 o 2022. The Hausman es
ecommends PMG es ima es while he coin eg a ion es e i ies he p esence o long- un co ela ions be ween
a iables. Acco ding o he indings o his s udy, oil p ices con ibu e o in la ion in Sou h Asian economies.
Mo eo e , echnological ad ancemen s ha e he abili y o lowe in la iona y p essu es. The o e all condi ion o
he labo ma ke pa icula ly is e lec ed in ac o s like employmen a es, which ha e a signa ican impac on
in la ion. Tigh labo ma ke s can esul in sho - e m demand-pull in la ion when wo ke s demand highe
wages. On he o he hand, cos -push in la ion may occu i wages con inue o ise s eadily o e ime.
1. In oduc ion
As a pe sis en and ongoing economic phenomenon, in la ion has a
signi ican in luence on how socie y pe cei es socioeconomic issues and
on how people ca y ou hei daily li es. Sou h Asia, a egion wi h a
popula ion o mo e han 2 billion, is undoub edly no exemp om he
e ec s o in la ion. In la ion is no only a heo e ical economic idea o
Sou h Asian economies; i is a ha sh eali y ha has an impac on hei
abili y o pay o essen ials. I is de ined as he s eady ise in he a e age
p ice o commodi ies and ameni ies o e ime. The a e age pe son’s
pu chasing powe dec eases as p ices ise, making i mo e di icul o
success ully make ends mee while main aining he same le el o li ing.
I s impac s sp ead o e e y a ea o he economy, a ec ing e e y
dimension. The e ec s o in la ion ha e an impac on he o e all
inancial heal h o he coun y and cause changes in household sa ing,
in es men , and spending habi s. Sa ings can lose alue due o in la ion,
which makes i di icul o people and amilies o budge o p esen and
u u e cos s and in es men s like e i emen , housing, and educa ion.
Because i can change p icing policies, p oduc ion cos s, and p o i -
abili y, in la ion is a p oblem o businesses as well. This can he e o e
cause wo ke s o expe ience job ins abili y and economic unce ain y.
The pas ajec o y o in la ion wi hin Sou h Asia has been cha ac-
e ized by cyclical swings and an ongoing inc easing endency, esul ing
in a dynamic business en i onmen . In la ion in Sou h Asia is ma ked by
al e na e pe iods o g adual p ice g ow h ollowed by sudden spikes in
p ices. The egion has gone h ough pe iods o hype in la ion, pa icu-
la ly in he 1970s and ea ly 1980s when in la ion a es soa ed o un-
manageable heigh s. In an e o o comba hese in la iona y p essu es,
au ho i ies ha e esponded o p e ious c ises by enac ing a numbe o
economic and policy measu es, equen ly in coo dina ion wi h in e -
na ional inancial ins i u ions. Ne e heless, despi e hese ini ia i es,
he pandemic-induced conside able ise in wo ldwide in la ion exace -
ba ed Pakis an’s in la ion p oblems. Poli ical unce ain y, ising ene gy
p ices, and he ca as ophic loods in he egion b ough addi ional
laye s o complica ion o he in la iona y scena io in he na ion and
exace ba ed his ebound.
* Co esponding au ho a : Wo ld Economy Depa men , Tashken S a e Uni e si y o Economics, Tashken 100003, Uzbekis an; Uni e si y o Tashken o Applied
Sciences, S . Ga ha 1, Tashken 100149, Uzbekis an.
E-mail add ess: [email p o ec ed] (M. Ahmad).
Con en s lis s a ailable a ScienceDi ec
Resea ch in Globaliza ion
jou nal homepage: www.sciencedi ec .com/jou nal/ esea ch-in-globaliza ion
h ps://doi.o g/10.1016/j. esglo.2024.100210
Recei ed 24 Sep embe 2023; Recei ed in e ised o m 14 Feb ua y 2024; Accep ed 6 Ma ch 2024
Resea ch in Globaliza ion 8 (2024) 100210
2
Wi h a g owing popula ion and ib an economic sec o s, coun ies
o Sou h Asia cons an ly s uggle o keep p ices s able. The pe sis ence o
in la ion in he egion and i s wide- anging e ec s a e he d i ing o ces
behind his s udy. In la ion e odes consume s’ pu chasing powe ,
pa icula ly among ulne able g oups who spend a la ge po ion o hei
income on necessi ies like ood and uel. I also makes i di icul o
businesses o plan long- e m s a egies. The e o e, in la ion has a
disp opo iona ely nega i e e ec on people who a e low on money. The
in e ac ion o supply and demand is an essen ial aspec o he analysis o
p icing mechanisms o economics. The coun ies in Sou h Asia ha e
wi nessed swings in in la ion a es o e he yea s and a iables ha
a ec he demand side such as economic a iables o consume
spending, and iscal policy has played a g ea ole in impac ing hem.
Howe e , he supply-chain ope a ion o he economy which usually
comes wi h p oduc ion-and dis ibu ion- ela ed bo lenecks and s uc-
u al incapaci y p oblems, has become a key indica o o he in la ion
dynamics o he economy. In his ega d, he ph ase “supply-side ac-
o s” needs o be seen in a b oad pe spec i e including he p oduc ion
and a ailabili y o p oduc s and se ices and also any s uc u al issues
ha ha e an impac on he heal h o he economy i sel .
Many ac o s can a ec in la ion le el di ec ly o indi ec ly bu
ocusing on he dynamics o he labo ma ke , echnological de-
elopmen s, and oil p ices as supply-side a iables a ec ing in la ion
enables a ocused in es iga ion o impo an d i e s in he economic
supply chain. These pa icula ac o s ha e a di ec impac on he cos s
o p oduc ion, he use o esou ces, and he e ec i eness o he supply
chain. As a esul , hey ha e a majo impac on he le els o o al p ices.
By a ec ing he p ices o goods and se ices, hese supply-side a iables
no only ha e a di ec impac on in la ion bu also ha e an impac on
la ge economic dynamics.
The s udy aims o c i ically assess he complex ela ionship be ween
supply-side ac o s and p ice s abili y o ha e an app ehension abou he
ways h ough which hese a iables impac p ice s abili y. The need o
his s udy a ose wi h he unde s anding ha in ac , supply-side ac o s
a e a dynamic phenomenon, which can ei he exace ba e o mi iga e he
p icing p essu es bu hey a e no simply he passi e con ibu o s o
in la ion. Unde s anding hei ole is e y impo an since hese a i-
ables ha e se e al componen s ha can a ec he p ice and he a ail-
abili y o i al goods and se ices. Thei complex ole is i al since hese
a iables include a wide ange o componen s ha migh a ec he
a ailabili y and cos o necessa y goods and se ices. Supply-side issues
ha e he abili y o cause p ice a ia ions, which in u n could a ec
people’s pu chasing powe and well-being. These ac o s ange om he
ola ile na u e o global oil p ices o local na u al esou ces, om
echnology b eak h oughs o egula o y e o ms. The e o e, o policy-
make s, economis s, and s akeholde s looking o map ou a cou se o
achie ing long- e m economic g ow h and p ospe i y, a ho ough ex-
amina ion o supply-side issues and hei impac on in la ion becomes
no jus pe inen bu also c ucial.
By concen a ing on he impac o supply-side a iables, his s udy
aims o imp o e ou knowledge o he dynamics o in la ion in Sou h
Asia. The esea ch a emp s o add o he body o knowledge al eady
a ailable conce ning in la ion in he egion by conduc ing an empi ical
analysis o hese aspec s. I explo es he key ac o s o igina ing om he
supply side o he economy, including echnical imp o emen s and en-
e gy esou ce a ailabili y. This s udy e alua es how hese elemen s will
manage p ice s abili y. Finally, ia lea ning mo e abou he supply-side
dynamics d i ing in la ion, he esea ch p o ides sugges ions and pe -
spec i es ha migh help decision-make s de elop policies ha gua -
an ee p ice s abili y.
The s uc u e o he pape is as ollows: sec ion 2 e iews pas
s udies, sec ion 3 discusses he me hodology and econome ics ech-
niques, sec ion 4 discusses esul s and sec ion 5 concludes he indings o
he s udy and sugges s policies.
2. Li e a u e e iew
Signi ican schola ly discussion and policy disag eemen ha e su -
ounded he connec ion be ween supply and demand side issues and
in la ion. Na u al esou ces including oil and o es s a e a signi ican
supply-side ac o ha a ec s he economic p og ess o a na ion
(Ahmad, Kuldashe a, Nas iddino , Balbaa, & Fahle i, 2023). Demand
as well as supply a iables can impac a coun y’s o e all p ice le el, and
hese wo o ces equen ly in e ac o de e mine in la ion’s cou se
(Ba h & Benne , 1975; D amais, 1977; Schwa ze , 2018). Many e-
sea che s ha e a gued ha he economic p essu es ha lead o in la ion
a e mos ly caused by supply-side ac o s (Zhang, 2012; Filis & Cha -
zian oniou, 2014; Masano i, 2020), while o he s ha e a gued ha
demand-side ac o s a e p ima ily esponsible o he in la iona y
p essu es ha lead o in la ion (Mon o & Pe˜
na, 2009; Hussain & Obaid,
2013). U ilizing a a ie y o heo e ical pa adigms and empi ical
esea ch, his sec ion o he li e a u e e iew discusses he nume ous
supply-side de e minan s ha ha e been deemed o be in la ion d i e s.
The a iables men ioned play a ole, in de e mining manu ac u ing
cos s, esou ce a ailabili y, and o e all economic p oduc i i y and u -
baniza ion. These ac o s ha e an impac on he dynamics o in la ion.
Howe e , Pan, Ash a , Raza, Nas iddino , and Ahmad (2023) and
Ahmad e al. (2023) ound ha u baniza ion a ec s he en i onmen
and economic g ow h asymme ically.
Economic esea che s and indus y p o essionals ha e long ecog-
nized ha cos -push in la ion and supply luc ua ions a e con ibu o s o
in la iona y p essu es (Ca in & Ba en, 1974; Ja ed, Fa ooq, & Ak am,
2010; Takami, 2015; Machlup, 2020). Cos -push in la ion occu s when
ising manu ac u ing cos s, such as labo expenses o aw ma e ial p ices
lead o an inc ease in p ices (Siho ang & Nopeline, 2020; Jain, Sha ma,
& Kuma , 2022). The classic cos push model is o en associa ed wi h he
w i ings o Mil on F iedman and Edmund Phelps om he 1960s
(F iedman, 1968; Phelps, 1968; Laidle , 2007; Dimand, 2008;
Schwa ze , 2018). Acco ding o hese economis s’ heo ies when un-
employmen is low o mode a e employees ha e ba gaining powe
du ing nego ia ions. This esul s, in wage inc eases ha businesses pass
on o cus ome s h ough p ices (Tobin, 1972; Lindbeck & Snowe , 2001;
Hassel, 2014). This concep was backed by esea ch conduc ed by Lipsey
(1960) and Solow (1969), who emphasized he ole o labo ma ke
dynamics, in d i ing cos -push in la ion.
Supply-side shocks e e o e en s o changes ha dis up p oduc ion
and impac he a ailabili y o goods and se ices, in he economy (Koks
& Thissen, 2016). These dis up ions can a ise om ac o s, including
luc ua ions in esou ce p ices, na u al disas e s, o geopoli ical e en s.
A p ime example o supply-side shocks occu ed in he 1970s when oil
p ices expe ienced luc ua ions due, o ensions (Wake o d, 2006; Fili-
ppidis, Filis, & Kizys, 2020). Resea ch conduc ed by Hamil on (1996)
Ba sky and Kilian (2002) and Aha on, Aziz, and Kalli (2023) indica es
ha such dis u bances can lead o cos -push in la ion by inc easing
p oduc ion and anspo a ion cos s. Nume ous empi ical s udies ha e
analyzed he connec ion be ween cos -push in la ion and supply-side
shocks. Galı and Ge le (1999) and Blancha d and Quah (1989) ha e
explo ed he ole o supply-side shocks in explaining changes in in la ion
o e ime and ac oss di e en coun ies. Thei indings indica e ha
supply-side shocks, including changes in commodi y and oil p ices,
signi ican ly con ibu e o luc ua ions in in la ion. Lei, Yang, Alha hi,
Rasul, and Raza (2022) and Gu e al. (2023) a gued ha dependence on
na u al esou ces also c ea es en i onmen al p oblems.
The connec ion, be ween in la ion and ad ancemen s in echnology
has cap u ed he in e es o esea che s (Shone, 1981; Danninge &
Mince , 2000; McAdam & Willman, 2013). Technological p og ess is
cha ac e ized by imp o emen s in p oduc ion me hods and he in o-
duc ion o p oduc s and se ices. These ad ancemen s can ha e conse-
quences, on in la ion. The g ow h o echnology has been consis en ly
associa ed wi h p oduc i i y, which in u n a ec s p ice le els. Solow
(1956) p oposed he idea o echnological ad ancemen as a ca alys o
M. Ahmad e al.
Resea ch in Globaliza ion 8 (2024) 100210
3
long- e m economic g ow h. The g ow h model de eloped by Solow
made clea how p oduc i i y gains b ough on by echnological de-
elopmen s migh esul in inc eased ou pu wi hou aising p ices. The
ela ionship be ween ising p oduc i i y, echnological de elopmen ,
and in la ion has been s udied empi ically. Acco ding o Go don (2012),
he “G ea S agna ion” in p oduc i i y g ow h o e he pas ew decades
has lowe ed in la ion. On he o he hand, B ynjol sson and McA ee
(2014), Co ado, Haskel, and Jona-Lasinio (2017), and L , Liu, and Xu
(2019) place a s ong emphasis on he con ibu ion o in o ma ion
echnology o ising p oduc i i y and possible in la ion.
An economy’s in la iona y p essu es a e g ea ly in luenced by labo
ma ke dynamics. The e a e se e al ways in which issues associa ed wi h
he labo ma ke migh a ec he le el o p ices gene ally, making he
ela ionship be ween in la ion and labo ma ke s complica ed. The
Phillips Cu e desc ibes a nega i e co ela ion be ween in la ion and
unemploymen . This link sugges s ha when unemploymen dec eases,
wage g ow h quickens, aising he cos o manu ac u ing. Demand-pull
in la ion occu s when ising cos s a e passed on o buye s in he o m o
inc eased p ices (Phillips, 1958). Expec a ions o in la ion can be
in luenced by labo ma ke condi ions, which in u n can ha e an impac
on how people nego ia e pay and es ablish p ices. Businesses and em-
ployees may demand g ea e wages and aise p ices i hey expec u u e
in la ion o be highe (Mankiw, 2001; Rudd, 2022; Yuldashe e al.,
2023). Wage p essu es can be a ec ed by he ex en o labo ma ke
igidi y, which is equen ly de e mined by he a io o open posi ions o
people looking o wo k. Wo ke s ha e mo e nego ia ing powe and can
ba gain o highe compensa ion when labo ma ke s a e cons ained
and job openings a e abundan . Businesses aising p ices o o se ising
labo expenses can esul in cos -push in la ion (Blancha d & Galí, 2007;
Dema y & Hü he , 2022(Balbaa e al., 2021).
3. Me hodology and da a
This s udy uses a linea econome ic model o examine how oil p i-
ces, echnological inno a ion, and labo ma ke dynamics a ec in la-
ion, and he model’s speci ica ion is as ollows:
IFi =
π
0+
π
0⋅OPi +
π
0TECHi +
π
0LMDi +
ε
i (1)
Whe e i indica es coun y and deno es ime. IF is in la ion, OP is he
oil p ice, TECH is echnological inno a ion and LMD is he labo ma ke
dynamics. Howe e , o check long- un and sho - un e ec s, Panel
ARDL is used. Be o e mo ing o ARDL, i is necessa y o es c oss-
sec ional dependence.
3.1. C oss-Sec ional dependence es
The assessmen o c oss-sec ional dependence is o pa amoun sig-
ni icance in empi ical esea ch employing panel da a, pa icula ly when
he sample uni s consis o de eloping and ansi ional coun ies ha
sha e analogous economic cha ac e is ics. The escala ion in spa ial
in e dependence wi hin panel da a is p ima ily a ibu ed o ac o s such
as globaliza ion, heigh ened economic in eg a ion, and educed ade
ba ie s (Tu ail, Song, Umu , Ismailo a, & Kuldashe a, 2022). Thus, we
a e employing a CD es in oduced by Pesa an (2015) ha is ecom-
mended o bo h balanced and unbalanced panel da ase s and aims o
ec i y po en ial biases and inconsis encies ha may a ise wi h he
igno ance o c oss-sec ional es . The Pesa an es s a is ic is cha ac e -
ized by he ollowing exp ession:
CD =
2T
m(m−1)
√(∑
m−1
i=1∑
m
j=i+1lij)m(0,1)(2)
He e, ‘m’ ep esen s he sample size, ‘T’ deno es he ime,
l
ij
signi ies
he o de ed pai wise co ela ion co esponding o each c oss-sec ion
wi hin each ime. This igo ous assessmen allows us o mi iga e he
po en ial ad e se e ec s o c oss-sec ional dependence, ensu ing he
eliabili y and in eg i y o ou empi ical esul s.
3.2. Slope homogenei y es
I is impe a i e o assess he homogenei y o slopes because uni oo ,
coin eg a ion, and long- un es ima ion echniques, which hinge upon
he assump ion o homogenei y o slopes, may yield un eliable ou comes
when con on ed wi h slope he e ogenei y. To add ess his conce n, we
ha e employed he well- ega ded slope homogenei y me hod de eloped
by Pesa an and Yamaga a (2008).
S=∑
N
i=1(βi−βWFE)XiM
τ
Xi
σ
2
i(βi−βWFE)(3)
Δ=
N
√(N−1S−k
2k
√)
Δ=
N
√(N−1S−E(zi )
a (zi )
√)
Whe e E(zi ) =k, a (zi ) =2 k (T−k−1)/(T+1).
3.3. Panel uni oo es
I is p e- equisi e o asce ain he s a iona i y o he a iables
inco po a ed in o he model be o e ad ancing o coin eg a ion, long-
un, and sho - un es s. In his ega d, we ha e op ed o he u iliza-
ion o second-gene a ion es s by Pesa an (2007), speci ically he CADF
and CIPS es s, which ake in o conside a ion he p esence o c oss-
sec ional dependence and he e ogenei y. The a ionale behind a o -
ing hese second-gene a ion es s o e hei i s -gene a ion coun e -
pa s lies in hei capaci y o add ess he in ica e in e play o c oss-
sec ional dependence and he e ogenei y, he eby mi iga ing he isk o
null hypo hesis o e - ejec ion, as delinea ed by (Choi, 2001(Kuldashe a
e al., 2023).
Δxi =
ρ
i+γixi, −1+βi
¯
x −1+∑
k
j=0
δijΔxi, −j+∑
k
j=1
θijΔxi, −j+
ε
i (4)
Whe e ΔYi and
ρ
i deno e a analyzed a iable and in e cep , espec-
i ely. Fu he , ¯
x e e s o he a e age o obse a ions a ime ,
espec i ely.
Whe eas, by a e aging he CADF we ob ain CIPs.
CIPS =1
N∑
N
i=1
CADF (5)
3.4. Panel coin eg a ion es
To examine he long- e m link be ween he a iables in his s udy,
he Du bin-Hausman panel coin eg a ion es has applied. This es can
only be applied i he endogenous a iable is s a iona y a le el I(1),
while he independen a iable could be s a iona y a le el I(0) o i s
di e ence I(1) (Wes e lund, 2008). Consequen ly, he Du bin-Hausman
es ’s ma hema ical equa ion is exp essed as
DHp=
Sn(
∅−
∅)2∑
n
i=1∑
T
=2
e2
i −1(6)
DHg=∑
n
i=1
Si(
∅−
∅)2(∑
T
=2
e2
i −1)(7)
In panel es ing, DHp is compu ed by summing indi idual e ms and
hen mul iplying, while DHg calcula es by mul iplying componen s and
hen summing. I ’s c ucial o di e en ia e hese s a is ics when o ming
al e na i e hypo heses. Panel mean null hypo hesis is H
0
: i =1 o all
M. Ahmad e al.
Resea ch in Globaliza ion 8 (2024) 100210
4
indi idual-speci ic e ec s; Al e na i e hypo hesis is H
1
: i =1 o all i.
G oup mean null hypo hesis H
0
: i =1 while Al e na i e hypo hesis is:
H
1
: i =1 o a leas some, indica ing a ying a e age indi idual-speci ic
e ec s ac oss da ase en i ies.
3.5. Panel au o eg essi e dis ibu ed lag (ARDL) model
In pu sui o es ima ing he long e m and sho - e m e ec s o in-
dependen a iables on in la ion, we ha e adop ed he panel ARDL
(Au o eg essi e Dis ibu ed Lag) modeling app oach. The a ionale o
selec ing his me hod is g ounded in i s demons a ed e iciency,
pa icula ly when we a e dealing wi h small sample sizes. Mo eo e , he
panel ARDL model is well-sui ed o add essing po en ial issues ela ed
o se ial co ela ion and endogenei y, based on p ope lag selec ion and
obus es ima es. The equa ion o Panel ARDL is w i en as
IF i =
ω
i+∑
j=1
βij IF i, −j+∑
q
j=0
α
1ij OP i, −j+∑
q
j=0
α
2ij TECH i, −j
+∑
q
j=0
α
3ijLMD i, −j+
ε
i
(8)
To selec op imal lag leng h Akaike In o ma ion C i e ion is used.
The e o co ec ion o m o he abo e model is as ollows;
ΔIF i =ϑi+∑
−1
j=1
βijΔIF i, −j+∑
q−1
j=0
α
1ijΔOP i, −j+∑
q−1
j=0
α
2ij ΔTECH i, −j
+∑
q−1
j=0
α
3ijΔLMD i, −j+φiECTi, −1+
ε
i
(9)
Whe e ECTi. −1=IFi, −1−γ1iOPi, −1−γ2iTECHi, −1−γ3iLMDi, −1In his
con ex , φ_i ep esen s he speed o adjus men coe icien , and a no e-
wo hy, nega i e alue o his coe icien signi ies he p esence o in e-
g a ion be ween he dependen and independen a iables.
Addi ionally,
π
1i,
π
2i,
π
3i deno e he long- un coe icien s. We ha e
employed bo h he Mean G oup (MG) and Pooled Mean G oup (PMG)
es ima ion echniques. In he panel ARDL models, he PMG app oach, as
p oposed by Pesa an, Shin, and Smi h (1999), assumes ha he long- un
coe icien s (
π
i) a e uni o m ac oss di e en c oss-sec ions while
allowing o he e ogenei y in he sho - un coe icien s. In con as , he
MG app oach, in oduced by Pesa an and Smi h (1995), is he leas
cons ic ing app oach, accommoda ing he e ogenei y o all pa ame e s.
Thus, he choice o he app op ia e app oach is de e mined by con-
duc ing he Hausman es .
3.6. Da a
This s udy uses panel da a o he pe iod o 1995 o 2022 o selec ed
5 Sou h Asian coun ies Pakis an, Bhu an, Bangladesh, India, and S i
Lanka. Sou h Asia is dealing wi h dis inc de elopmen al obs acles, such
as dispa i ies in in as uc u e, po e y, and income dispa i ies. In la ion
dynamics di ec ly impac hese issues, hus i ’s c i ical o comp ehend
wha ac o s can con ol in la ion dynamics. Policymake s may suppo
mo e equi able and sus ainable de elopmen in Sou h Asia by p ope ly
con olling in la ion. The da a on in la ion is collec ed om he WDI
da abase. The da a on c ude oil p ices is ga he ed om he EIA da abase.
Fo echnological inno a ions, da a on pa en s is used as a p oxy and he
da a is collec ed om he WDI da abase. To assess he impac o labo
ma ke dynamics, we used ILO’s da a on he global employmen a e.
The labo ma ke in Sou h Asia is becoming mo e and mo e in eg a ed
wi h he wo ld economy. Sou h Asian indus ies and en e p ises a e
di ec ly impac ed by changes in global employmen ends and a es,
pa icula ly hose in he manu ac u ing o se ice sec o s ha a e
ocused on expo s.
4. Resul s and discussion
P io o pe o ming he uni oo analysis, a C oss-Sec ional Depen-
dence (CD) es is used in his s udy. The indings o he CD es show
ha he e is no p oo o c oss-sec ional dependence ac oss he a iables
being s udied. The ou come o he C oss-Sec ional Dependency es is
no able and is clea ly illus a ed in Table 1. Low p- alues (all below 5
%), which indica e he exis ence o c oss-sec ional dependency a he
le el o signi icance equal o 1 % o all se ies unde conside a ion,
indica e ha he null hypo hesis has been uled ou based on he es
esul s. This inding implies ha changes o dis u bances in he a iables
may po en ially impac any o he panel egions.
The CD es essen ially emphasizes how closely connec ed he a i-
ables a e ac oss a ious loca ions in he panel da ase . This conclusion is
signi ican because i sugges s ha hings a ec ing one egion may ha e
an impac on o he s as well, emphasizing he need o a ho ough un-
de s anding o how di e en egions a e in e ela ed. Fu he mo e, his
s udy uses a es by Pesa an and Yamaga a (2008) o de e mine i he
coe icien s unde coin eg a ion emain consis en o homogeneous
ac oss he a iables. This es has been designed o de e mine whe he
he slope pa ame e s o coin eg a ion ela ionships a e uni o m o ho-
mogeneous. In his es , he null hypo hesis is ha he e a e homoge-
neous slope pa ame e s, which implies ha he coe icien s a e cons an
be ween he panels. The al e na i e hypo hesis, on he o he hand,
sugges s ha he e is no homogenei y and ha he coe icien s g ea ly
a y be ween he panels. The es ou come, which is shown in Table 2,
o e s impo an insigh s in o he empi ical alidi y o he null hypo h-
esis, and based on he esul s we conclude ha he e exis s slope
he e ogenei y.
This s udy hen uses second-gene a ion panel uni oo es s, CIPS
and CADF, o look a he s a iona i y cha ac e is ics o he a iables in
mo e de ail. These es s will add o ou unde s anding o he ime se ies
p ope ies o he da a and aid in iden i ying any po en ial long- e m
pa e ns o s uc u al ac u es, making he analysis mo e ho ough.
The indings o hese es s a e epo ed in Table 3. The indings show
ha IF is non-s a iona y a a le el howe e i becomes s a iona y a e
aking he i s di e ence. OP is also non-s a iona y a he le el and
s a iona y a he i s di e ence. Tech is s a iona y a bo h he le el and
he i s di e ence. LMD is s a iona y a bo h le el and i s di e ence
acco ding o CIPS while non-s a iona y a he le el acco ding o CADF
and s a iona y a he i s di e ence.
In his app oach, de e mining whe he he a iables ha e a long-
e m equilib ium connec ion is he main goal. Unde s anding how
hese ac o s in e ac h ough ime and whe he hey ha e a p opensi y
o mo e oge he , in he long un, equi es es ablishing such a ela-
ionship. The s udy makes use o a coin eg a ion es c ea ed by Wes -
e lund (2008) o in es iga e his. The Wes e lund coin eg a ion
examina ion was pu pose ully chosen, and a ious easons d o e his
decision. Fi s o , his es is enowned o being e ec i e e en when
used wi h modes sample sizes. I can be di icul o ge s a is ically
eliable esul s in many empi ical s udies, especially hose ha include
ew da a poin s o obse a ions. The Wes e lund coin eg a ion es ,
howe e , is made o p oduce accu a e esul s. A c ucial issue in panel
da a analysis, panel he e ogenei y, is add essed by he Wes e lund
coin eg a ion es , which ackles he i s issue. Di e en ia ions o
Table 1
CD es esul s.
Va iables CD-S a P alue
IF 5.32 0.000 ***
OP 27.98 0.000 ***
TECH 21.57 0.000 ***
LMD 4.98 0.000 ***
No e: IF, in la ion; OP, oil p ice; Tech, echnological inno a ion; LMD, labo
ma ke dynamics. *** shows a 1 pe cen signi icance le el.
M. Ahmad e al.
Resea ch in Globaliza ion 8 (2024) 100210
5
a ia ions be ween he many en i ies o g oups ha make up he da ase
a e e e ed o as he e ogenei y. Di e en economic condi ions, egional
di e ences, o o he ac o s may be he cause o his he e ogenei y. The
in luence o he e ogenei y ac oss he long- e m and sho - e m associ-
a ions be ween a iables is signi ican . The Wes e lund es accoun s o
and manages his he e ogenei y, making su e he indings a e eliable
and ans e able ac oss di e en panels. The indings a e gi en in
Table 4 and esul s indica e he exis ence o coin eg a ion.
The Panel app oach is used in his wo k o calcula e he sho - and
long- e m impac s o h ee impo an a iables on in la ion: oil p ices,
echnological inno a ion, and labo ma ke dynamics. This app oach
enables he examina ion o connec ions, be ween a iables o e bo h
long ime ames. Fu he mo e, o de e mine he lag leng h o ou model
we ha e deployed Akaike In o ma ion C i e ia (AIC) o accu a ely cap-
u e he dynamics o hese in e ac ions.
Table 5 displays he ou comes o he Panel ARDL es ima ion. The
model is es ima ed using wo widely used es ima o s, he Mean G oup
(MG) es ima o and he Pooled Mean G oup (PMG) es ima o . Gi en ha
hey ake in o accoun g oup-speci ic da a a iances, hese es ima o s
a e use ul ools in he analysis o panel da a. This s udy uses he Haus-
man es o e alua e which o he wo es ima o s—MG o PMG—is mo e
sui able o he model. A s a is ical es called he Hausman es is used
o de e mine whe he he a ia ions wi hin he es ima o s a e consis en
o andom. By compa ing he consis ency and e ec i eness o he MG
and PMG es ima o s, i is possible o selec he bes one o his s udy.
The Hausman s a is ic is s a ed o ha e a alue o 2.49 and a p obabili y
alue o 0.330. When analyzing he indings o he Hausman es , e-
sea che s decide whe he he p obabili y alue is less han a p e-
de e mined signi icance le el, equen ly se a 0.05. Since he
p obabili y alue (0.330) goes abo e 0.05 hus we conclude ha PMG is
be e .
Resul s epo ed in Table 5 show ha e o adjus men is aking
place. The ECT alue o −0.389 in PMG shows ha 38.9 pe cen o e o
is being adjus ed annually howe e he a e is highe in MG. The coe -
icien alue o OP in bo h MG and PMG shows ha oil p ices cause he
o e all p ice le el o inc ease o e he sho and long un. Acco ding o
PMG 1 pe cen inc ease in OP causes in la ion o inc ease by 0.523
pe cen in he sho un and 0.329 pe cen in he long un. In he sho
e m, ising oil p ices di ec ly inc ease p oduc ion cos s o i ms,
especially hose ha depend subs an ially on pe oleum as an inpu ,
such as he manu ac u ing and anspo a ion sec o s. Businesses may
decide o pass on hese g ea e p oduc ion cos s o cus ome s by
inc easing he p ice o hei p oduc s and se ices. Cos -push in la ion is
he e m o his p ocess. Expec a ions o in la ion migh be a ec ed by
pe sis en ly high oil p ices. Consume s and co po a ions may al e hei
beha io i hey belie e ha he p ice o oil will g ow in he long un.
Businesses may boos p ices in expec a ion o g ea e p oduc ion cos s,
while employees may demand be e wages o compensa e o ising
ene gy expenses. These in la ion expec a ions ha e he po en ial o sel -
ul ill, which would aise p ices o e ime. F om p oduc ion o ans-
po a ion, oil is an essen ial link in many supply ne wo ks. Long- e m
high oil p ices migh esul in inc eased expenses ac oss he boa d o
he indus ial p ocess. These p ice ises may sp ead amongs o he
businesses, e en ually ha ing a wide - anging in la iona y e ec .
The coe icien o TECH is insigni ican in he sho un and signi i-
can in he long un acco ding o MG es ima es while he PMG es ima es
show ha echnological inno a ion has a dec easing e ec on in la ion
o e he sho and long un. Acco ding o PMG, 1 pe cen inc ease in
TECH dec eases in la ion by 0.152 pe cen in he sho un and 1.098
pe cen in he long un. P oduc ion p ocesses a e equen ly enhanced
by echnological b eak h oughs, making hem mo e e ec i e. Busi-
nesses may expe ience a sho - e m educ ion in p oduc ion cos s as a
esul o his imp o ed e iciency, allowing hem o o e p oduc s o
se ices a a educed cos . Lowe o e all in la ion a es esul om he
educ ion o , in ce ain ci cums ances, e e sal o cos -push in la iona y
p essu es. Long- e m echnological ad ancemen s can esul in s eady
gains in p oduc i i y in a a ie y o economic sec o s. The o e all supply
o commodi ies can ise wi hou aising p ices as employees and ma-
chines g ow mo e e ec i e a c ea ing goods and se ices. Wi h
inc eased supply capaci y, ising demand may be me wi hou ha ing o
aise p ices, which p omo es p ice s abili y and dec eases in la ion.
The MG es ima es show ha LMD has an insigni ican e ec on
in la ion in he sho un while he e ec is signi ican ly posi i e on
in la ion in he long un. On he o he hand, acco ding o PMG, he
coe icien o LMD is posi i e in bo h sho and long pe iods. Acco ding
o PMG, 1 pe cen inc ease in LMD inc eases in la ion by 0.688 pe cen
in he sho un and 0.619 pe cen in he long un. Th ough he idea o
demand-pull in la ion, labo ma ke dynamics migh a ec in la ion in
he sho e m. Wo ke s equen ly ha e mo e nego ia ing le e age o
demand highe sala ies when labo ma ke s igh en, which means he e
is an inc ease in employmen and a d op in unemploymen . Businesses
may inc ease he p ice o goods and se ices o consume s as a esul o
ising wages. As a esul , he e is excessi e demand o p oduc s and
se ices, which exceeds supply, pushing up p ices. The concep o cos -
push in la ion allows o he long- e m impac o labo ma ke dynamics
o be el on in la ion. Long- e m igh labo ma ke s may esul in ising
wages, which would aise en e p ises’ p oduc ion cos s. These cos in-
c eases may e en ually be e lec ed in inc eased p icing o p oduc s and
se ices, which will help d i e up in la ion. Long- e m luc ua ions in
Table 2
Slope homogenei y es esul s.
Tes S a is ic p- alue
Del a- ilde 16.09 0.000***
Del a- ilde-adj 19.20 0.000***
No e: *** shows a 1 pe cen signi icance le el.
Table 3
Ou comes o CIPS and CADF.
Va iables CIPS CADF
le el 1s di e ence le el 1s di e ence
IF −1.098 0.145 −1.443 0.113
OP −0.769 −3.764 *** −1.024 −3.065 ***
TECH −3.799 *** −3.913*** −2.985** −3.113***
LMD −2.412** −3.874*** −1.433 −3.009 ***
No e: ** and *** shows 5 and 1 pe cen signi icance le el espec i ely.
Table 4
Wes e lund es esul s.
S a is ic p- alue
DH G oup s a 4.092 0.000***
DH Panel s a 3.240 0.000***
No e: *** shows 1 pe cen signi icance.
Table 5
Resul o ARDL (1,1,0,0).
Va iable MG PMG
Sho un Long un Sho un Long un
ECT −0.543 *** −0.389 ***
ΔOP 0.335 *** 0.523 ***
ΔTECH −0.078 −0.152**
ΔLMD 0.176 0.688***
OP 0.105* 0.329**
TECH −0.787** −1.098***
LMD 0.045 0.619***
Cons an 3.286*** 1.542**
Hausman Tes 2.49, p- alue (0.330)
Obs. 140
No e: *, ** and *** shows 10, 5, and 1 pe cen signi icance le el espec i ely.
M. Ahmad e al.
Resea ch in Globaliza ion 8 (2024) 100210
6
labo p oduc i i y, popula ion ends, and employmen a es can also
ha e an impac on he economy’s o e all supply o p oduc s and se -
ices, which can ha e an impac on in la ion ends.
We ha e also pe o med G ange causali y es o analyze he cau-
sali y be ween a iables o he model. The esul o causali y es is e-
po ed in Table 6. Resul s show ha oil p ice, echnology and labo
ma ke dynamics a ec in la ion signi ican ly. Fu he mo e, oil p ices
and echnology a e also ound o a ec labo ma ke dynamics because
se e al indus ies a e sensi i e o changes in oil p ices and echnological
ad ancemen s can lead o job displacemen s.
5. Conclusion and policy sugges ions
This s udy by employing Panel ARDL on selec ed Sou h Asian
coun ies o he pe iod o 1995–2022, assesses he impac o oil p ice,
echnology, and labo ma ke dynamics on in la ion. The coin eg a ion
es alida es he exis ence o long- un ela ionships be ween a iables
while he Hausman es a o s PMG es ima es. This s udy concludes ha
oil p ices signi ican ly a ec in la ion in Sou h Asian economies. In la-
ion is signi ican ly impac ed by oil p ices, which a e equen ly known
o hei ola ili y and ulne abili y o wo ld e en s. Despi e he ac
ha ising cos s o p oduc ion and ene gy- ela ed expenses can cause
sho - e m spikes in in la ion, he long- e m implica ions o oil p ice
shocks a e mo e complex. Technological inno a ions ha e he po en ial
o educe in la iona y p essu es when used app op ia ely. In la ion is
signi ican ly in luenced by he s a e o he labo ma ke , which is e-
lec ed in elemen s like employmen a es. Sho - e m demand-pull
in la ion can be caused by igh labo ma ke s when wo ke s seek highe
wages. On he o he hand, sus ained wage ise o e ime may igge
cos -push in la ion.
Based on he indings, his s udy sugges s ha he in la iona y e ec s
o luc ua ing oil p ices o e ime can be educed by di e si ying one’s
ene gy supply and inc easing ene gy e iciency. Go e nmen s should
hink abou c ea ing s a egic pe oleum ese es and pu ing in place
p ice s abili y mechanisms o lessen he sho - e m impac o oil p ice
changes on in la ion. Ene gy e iciency and he p omo ion o enewable
ene gy sou ces should be p io i ized in long- e m s a egies since hey
can imp o e ene gy secu i y and lessen sensi i i y o luc ua ions in he
p ice o oil. To enhance he a o able e ec o echnology on in la ion, a
clima e ha encou ages echnological inno a ion should be p omo ed
by policymake s. In es men s in educa ion, esea ch, and de elopmen ,
and he o ma ion o inno a ion clus e s can help achie e his.
Rega ding labo ma ke dynamics, his s udy sugges s imp o ing un-
employmen insu ance p og ams o o e assis ance du ing economic
down u ns, easing p essu e on wages and in la ion du ing imes o igh
labo ma ke s.
Poli ical, social, and ins i u ional issues can cause di e ences in a
coun y’s endo semen and implemen a ion o policies. The iabili y
and e icacy o he abo e ecommenda ions may be impac ed by di -
e ences in go e nmen s’ desi e and abili y o implemen ecommended
measu es.
5.1. Limi a ions and u u e di ec ion
One no able limi a ion o his esea ch migh be ha i only conside s
supply-side a iables o explain in la ion ends. E en while hese issues
mus be examined, ocusing only on supply-side d i e s migh igno e he
complex in e ac ions ha e ec in la ion in he Sou h Asian egion due
o demand-side dynamics, o eign ac o s, and mone a y policy. Fu u e
s udies may conside adop ing a mo e adequa e me hodology ha akes
in o accoun he complex connec ions be ween supply-side and demand-
side componen s in shaping in la ion dynamics.
CRediT au ho ship con ibu ion s a emen
Maaz Ahmad: Concep ualiza ion, W i ing – o iginal d a . Zebo
Kuldashe a: . Nilu a Ismailo a: P ojec adminis a ion, Supe ision.
Muhammad Eid Balbaa: Da a cu a ion, Fo mal analysis. Nazoka
Ak amo a: So wa e, Valida ion. Noo Ul Ain: In es iga ion,
Resou ces.
Decla a ion o compe ing in e es
The au ho s decla e ha hey ha e no known compe ing inancial
in e es s o pe sonal ela ionships ha could ha e appea ed o in luence
he wo k epo ed in his pape .
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Table 6
G ange -Causali y es .
Hypo hesis Z-s a p- alue
IF doesn’ cause OP 0.332 0.693
OP doesn’ cause IF 1.832 0.032**
IF doesn’ cause TECH 0.605 0.441
TECH doesn’ cause IF 1.691 0.074*
IF doesn’ cause LMD 0.092 0.854
LMD doesn’ cause IF 2.647 0.000***
OP doesn’ cause TECH 0.139 0.778
TECH doesn’ cause OP 0.826 0.410
OP doesn’ cause LMD 1.523 0.049**
LMD doesn’ cause OP 0.234 0.758
TECH doesn’ cause LMD 2.046 0.002***
LMD doesn’ cause TECH 1.132 0.127
No e: *, ** and *** shows 10, 5, and 1 pe cen signi icance le el espec i ely.
M. Ahmad e al.
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