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Dynamics of Economic Policy Uncertainty and Exchange Rate: Evidence from Pakistan

Author

Listed:
  • Rimsha Falak

    (National Business School, The University of Faisalabad, Pakistan)

  • Faiz Rasool

    (Institute of Business Management Sciences, University of Agriculture Faisalabad, Pakistan)

  • Muhammad Mudassar Hussain

    (Lyallpur Business School, Government College University, Faisalabad, Pakistan)

  • Muhammad Ahmad Raza

    (Institute of Business Management Sciences, University of Agriculture Faisalabad, Pakistan)

Abstract

The Pakistani economy has encountered substantial exchange rate volatility due to many endogenous and exogenous shocks, including adopting different exchange rate systems, the global financial crisis, sanctions, and the COVID-19 pandemic. Data was collected from the period of 2002 to 2023. Exchange rate Volatility was used as a dependent variable, whereas Trade Volume, Oil Price, and Economic Policy Uncertainty were used as independent variables. Numerous economic techniques, such as Descriptive Statistics, OLS, Unit Roots, and Quantile Regression, were used while using the EViews software to get the desired results. Secondary data was collected from Authentic sources in Pakistan. The analysis utilizes the technique of linear regression to present statistics on the results, along with a unit root test. The finding revealed a negative impact of ERV (Exchange Rate Volatility) on the EPU; however, the outcomes confirmed a positive effect of Oil price and Trade Volume on Economic Policy Uncertainty. Unit roots results describe that data is stationary for all the selected variables, which means that the null hypothesis is accepted. The findings confirmed that the Pakistani currency appreciates the rise in international oil prices and trade in Pakistan. Government officials and policymakers can benefit from the insights and suggestions provided by this study to traverse the difficulties and seize the chances of creating Pakistan's economic policies. Governments, legislators, and other pertinent stakeholders may find our study's conclusions helpful.

Suggested Citation

  • Rimsha Falak & Faiz Rasool & Muhammad Mudassar Hussain & Muhammad Ahmad Raza, 2024. "Dynamics of Economic Policy Uncertainty and Exchange Rate: Evidence from Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 13(2), pages 925-931.
    • Handle: RePEc:rfh:bbejor:v:13:y:2024:i:2:p:925-931
    DOI: https://doi.org/10.61506/01.00410
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    References listed on IDEAS

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    1. Shaista Alam & Qazi Masood Ahmed & Muhammad Shahbaz, 2018. "The Effect of Exchange Rate Volatility on Pakistan’s Bilateral Exports to Major Recipients," Global Business Review, International Management Institute, vol. 19(2), pages 328-341, April.
    2. Ali, Amjad, 2022. "Foreign Debt, Financial Stability, Exchange Rate Volatility and Economic Growth in South Asian Countries," MPRA Paper 116328, University Library of Munich, Germany, revised 2022.
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