ABSTRACT
Multiple regression analysis is used to quantify the relationships of various energy-economy interactions. The results of impact analysis have implications for programs relating to trade policies, environmental issues, conservation techniques and economic development strategies. The modeling framework is also applicable to other developing countries. Energy and capital stocks are the two major explanatory variables for aggregate output. Labor is not included because several proxy variable such as unemployment and population did not produce any sensible result. The inflation is measured by wholesale price index in this model. The major purpose of developing the energy economy model for Pakistan is to apply the estimated equations to various simulation schemes. The dynamic simulation with actual prices produced very reasonable projection of all the endogenous variables. The predictive errors are generally less than 5%.
