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Devaluation and the Balance of Trade: A Policy Analysis for Pakistan

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Devaluation is frequently recommended as part of structural adjustment programs for attaining external balance. Estimating export and import demand functions has been a conventional method of evaluating the likely effect of a devaluation on the external balance. In this paper we address an important critique of the conventional method of estimating export demand functions and make a case for using real effective exchange rates rather than relative prices in the demand functions. We also demonstrate that high income elasticities in the conventional export demand functions need not be cause for concern.

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  • Khan , Shahrukh R. & Aftab, Safiya, 1996. "Devaluation and the Balance of Trade: A Policy Analysis for Pakistan," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 49(2), pages 247-260.
    • Handle: RePEc:ris:ecoint:0376
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    Cited by:

    1. Amjad Ali & Muhammad Irfan Chani, 2013. "Disaggregated Import Demand Function: A Case Study of Pakistan," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 1(1), pages 1-14, January.
    2. Naeem Ur Rehman Khattak & Muhammad Tariq, 2012. "Are Real Devaluations Contractionary? an Empirical Analysis for Pakistan," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 2(1), pages 119-134, March.
    3. Muhammad Irfan CHANI & Zahid PERVAIZ & Amatul R. CHAUDHARY, 2011. "Determination of Import Demand in Pakistan: The Role of Expenditure Components," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(8(561)), pages 93-110, August.

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