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Factors effecting exchange rate: a case of pakistan

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  • Khan, Imran

Abstract

This paper investigate different macroeconomic factor that affect exchange rate of Pakistan. Macroeconomic factor include export, import, interest, inflation and current account. Data has been collected annually from 1991 to 2014. Augmented Dickey-Fuller test has been applied to check for stationarity in the data. Exchange rate and interest were found stationary at level, while rest of the variables were stationary at first difference. Johansen co-integration test has been applied to observe for long term relation among variables. Result revealed that there are three co-integrated equations, as there likelihood values are greater than the critical value both at 5% and 1%. So, Johansen co-integration test rejects the assumption of no co-integration. Two stages least square regression has been applied to observe relationship between dependent variable and independent variables. Export, interest and inflation found significant, while import and current account were insignificant.

Suggested Citation

  • Khan, Imran, 2016. "Factors effecting exchange rate: a case of pakistan," MPRA Paper 75209, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:75209
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    References listed on IDEAS

    as
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    5. Tang, Hsiao Chink, 2011. "Intra-Asia Exchange Rate Volatility and Intra-Asia Trade: Evidence by Type of Goods," Working Papers on Regional Economic Integration 90, Asian Development Bank.
    6. Razzaque H. Bhatti, 2001. "Determining Pak Rupee Exchange Rates vis-à-vis Six Currencies of the Industrial World: Some Evidence Based on the Traditional Flow Model," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 40(4), pages 885-897.
    7. Auboin, Marc & Ruta, Michel, 2011. "The relationship between exchange rates and International Trade: A review of economic literature," WTO Staff Working Papers ERSD-2011-17, World Trade Organization (WTO), Economic Research and Statistics Division.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Current Account; Exchange rate; Exports; Imports; Inflation; Interest rate;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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