IDEAS home Printed from
   My bibliography  Save this article

The Impact of Exchange Rate on Output Level: Bounds Testing Approach for Pakistan


  • Muhammad Nawaz

    (Pakistan Institute of Development Economics, Islamabad)


Currency depreciation has been an influential instrument to boost-up the net export of the developing economies that face the strict conditions of international donors along with elevated trade deficit. The eventual intention behind this channel is to achieve the improved current account status that result in higher output level. But the output growth may be dwindling in long-run that may not allow the traditional channel to work. This study examines the given analysis by utilising the annual data set over the period 1972-2010 for output, nominal exchange rate and price level along with different control variables in case of Pakistan. The findings based on Bound-testing approach to auto-regressive distributive lag model (ARDL) indicates that traditional theories do not work in long-run and currency depreciation may lead to reduction in output while the short-run Error-Correction Model (ECM) results robustly support to the traditional theories of open economy macroeconomics in which currency depreciation increases the output level. The study explores the new dimension of research both for policy-maker and international donors working in developing countries, particularly in South Asian region.

Suggested Citation

  • Muhammad Nawaz, 2012. "The Impact of Exchange Rate on Output Level: Bounds Testing Approach for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 51(4), pages 419-434.
  • Handle: RePEc:pid:journl:v:51:y:2012:i:4:p:419-434

    Download full text from publisher

    File URL:
    Download Restriction: no

    More about this item


    Exchange Rate; Output Level; Bound-testing Approach; Economic Growth; Crowding-out;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pid:journl:v:51:y:2012:i:4:p:419-434. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Khurram Iqbal). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.