Exchange Rate Volatility and Aggregate Exports Demand through ARDL Framework: An Experience from Pakistan Economy
AbstractThis study estimates the exports demand for Pakistan by employing Autoregressive Distributed Lag model and using quarterly data for the period 1982Q1-2008Q2. The paper seeks to examine the long run as well as short run impact of real effective exchange rate volatility along with foreign real income, relative price of exports and real effective exchange rate on demand for exports. The empirical results reveal that demand for real exports are co-integrated with real foreign income, relative price of aggregate exports, real effective exchange rate and volatility of real effective exchange rate. Real foreign income is found to have a significant positive effect on exports demand, suggests that Pakistanâ€™s aggregate exports demand depend significantly on its trading partnerâ€™s income. The relative price of exports carries significant negative coefficient suggesting that increase in relative price of exports may decrease the level of exports demand in the long run. The volatility of real effective exchange rate, has adversely affect the Pakistanâ€™s aggregate exports in the long run. The result further demonstrates that real effective exchange rate volatility and relative price of exports ranger causes aggregate exports in the short run.
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Bibliographic InfoArticle provided by Review of Applied Economics in its journal Review of Applied Economics.
Volume (Year): 08 (2012)
Issue (Month): 1 ()
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Exchange rate volatility; aggregate exports and real foreign income; Demand and Price Analysis; Financial Economics; International Development; International Relations/Trade; F10; F31; and C32;
Find related papers by JEL classification:
- F10 - International Economics - - Trade - - - General
- F31 - International Economics - - International Finance - - - Foreign Exchange
- and - - - - - -
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
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