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Impact of Devaluation on Balance of Trade: A Case Study of Pakistan Economy

Author

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  • Zeeshan Khan
  • Asghar Ali
  • Shahid Ali

Abstract

This study investigates the impact of devaluation on balance of trade and on the External Debt, in case of Pakistan, over the period of 1980 to 2014. The key focus of this study is to check the long run relationship among devaluation of domestic currency on Pakistan Balance of Trade and External Debt, over the period of 1980 to 2014. Further, this study also examines the short run relationship between these two variables. Moreover, this study tests the validity of J-curve in case of Pakistan. In order to examine the long run relationship between devaluation of domestic currency and balance of trade in the presence of control variables, this study uses ARDL (Autoregressive distributed lag model) econometric technique. For short run relationship between devaluation of domestic currency and balance of trade, this study uses ECM (Error Correction Mechanism). This study will recommend improved policy recommendations that whether devaluation should be carried out or not. Thus, this paper will certainly benefit the policy makers in Pakistan to deal with Exchange rates in the context of international trade and also to deal with external debt in this regards.

Suggested Citation

  • Zeeshan Khan & Asghar Ali & Shahid Ali, 2016. "Impact of Devaluation on Balance of Trade: A Case Study of Pakistan Economy," Asian Journal of Economic Modelling, Asian Economic and Social Society, vol. 4(2), pages 90-94.
    • Handle: RePEc:asi:ajemod:v:4:y:2016:i:2:p:90-94:id:850
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    Citations

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    Cited by:

    1. Mohsen Bahmani-Oskooee & Ahmed Usman & Sana Ullah, 2020. "Asymmetric J-curve in the commodity trade between Pakistan and United States: evidence from 41 industries," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 10(2), pages 163-188, June.
    2. Raheela Khatoon & Iqbal Javed & Muhammad Munawar Hayat, 2021. "Impact of human capital on economic growth: A case study of Pakistan," Journal of Social Sciences Advancement, Science Impact Publishers, vol. 2(2), pages 64-69.
    3. SOLOMON PRINCE Nathaniel, 2020. "Does Exchange Rate Have Asymmetric Impact On Trade Balance? Fresh Insights From Combined Cointegration," Studies in Business and Economics, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 15(1), pages 259-269, April.
    4. Muhammad Naveed Jamil & Abdul Rasheed & Adnan Maqbool & Zeeshan Mukhtar, 2023. "Cross-cultural study the macro variables and its impact on exchange rate regimes," Future Business Journal, Springer, vol. 9(1), pages 1-15, December.

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