Effects of Exchange Rate Instability on Imports and Exports of Pakistan
The instability in exchange rate (appreciation and depreciation in home currency) is an important factor indetermination of trade balance of a country. Fluctuating exchange rates impacts the decision making of investors and traders, it shatters their confidence which ultimately leads to the slown...
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| Format: | Article |
| Language: | English |
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Danubius University
2014-04-01
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| Series: | Acta Universitatis Danubius: Oeconomica |
| Subjects: | |
| Online Access: | http://journals.univ-danubius.ro/index.php/oeconomica/article/view/2215/2095 |
| Summary: | The instability in exchange rate (appreciation and depreciation in home currency) is an
important factor indetermination of trade balance of a country. Fluctuating exchange rates impacts the
decision making of investors and traders, it shatters their confidence which ultimately leads to the
slowness of trade process. In this research paper the effect of exchange rate instability is measured on
imports and exports of Pakistan. For this purpose Regression analysis is used and it is calculated that
if instability is created due to depreciation in home currency (Pak rupee) then it has positive impact
on Pakistan‘s exports, while it has absolutely no effect on imports of Pakistan. Since Pak rupee has
very limited appreciation during last 20 years so appreciation effect of home currency can not be
calculated on Imports and exports of Pakistan. In theoretical prospective the devaluation of home
currency should decrease the volume of imports, because it will cost more for Pakistan to import
goods from other countries. But our empirical findings show that, this is not the case between
exchange rate and imports of Pakistan. The imports of Pakistan grew even in large figure as the home
currency depreciated against other currencies. So this shows that depreciation of home currency do
not effect the imports in of Pakistan. Our findings through regression analysis show that by decrease
in value of home currency imports of Pakistan increase. So depreciation in home currency has no
effect on imports volume. |
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| ISSN: | 2065-0175 2067-340X |