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What Determines Balance of Payments: A Case of Pakistan

Author

Listed:
  • Batool, Syeda Azra

    (Bahauddin Zakariya University Multan)

  • Mehmood, Tahir

    (University of the Punjab)

  • Jadoon, Atif Khan

    (University of the Punjab)

Abstract

Distortion in balance of payments is one of the dominant causes for the sluggish economic condition of Pakistan. The present article has focused to scrutinize the relationship of the balance of payments to its certain determinants that are actually blamable or not for its distortion. The robust ARDL structure has been utilized to develop the bound testing approach to co-integration and error correction models on data set for 1972-2013.The bound test declares that there exists stable long run relationship of balance of payments to its determinants. The upshots indicate that real exchange rate inversely influences the balance of payments not only in the long run but also in the short run. Interest rate inversely affects the balance of payment in the long run but positively affects in the short run .Fiscal balance affects the BOP negatively in the long and short run simultaneously. As regards the real GDP, it moves the BOP in the positive direction in both long and short run. The money supply cast positive influence on the BOP in the short run but negative effect in the long run. So the need of the hour is that the real GDP of Pakistan should be increased by the deliberate policy of the government. Because it is the GDP that can increase our savings consumption and government expenditures and exports and can improve balance of balance of payment.

Suggested Citation

  • Batool, Syeda Azra & Mehmood, Tahir & Jadoon, Atif Khan, 2015. "What Determines Balance of Payments: A Case of Pakistan," Sukkur IBA Journal of Management and Business, Sukkur IBA University, vol. 2(1), pages 47-70, April.
    • Handle: RePEc:ris:ibajmb:0011
    DOI: 10.30537/sijmb.v2i1.88
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    Citations

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    Cited by:

    1. Akpansung, Aniekan O., 2021. "Impact of Real Effective Exchange Rates on Balance of Payments: Empirical Evidence from Nigeria," African Journal of Economic Review, African Journal of Economic Review, vol. 9(4), September.
    2. Tamer Rawashdeh & Mahmoud Al-Rdaydeh & Basem Hamouri, 2020. "The Effect of International Currency Crises on the Balance of Payments: Evidence From Jordan," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(5), pages 275-284, October.
    3. Abdul Hadi Sultani & U. Faisal, 2024. "Exploring the dynamics of the balance of payments problems: the case of Afghanistan," International Economics and Economic Policy, Springer, vol. 21(3), pages 569-592, July.

    More about this item

    Keywords

    Balance of Payments (BOP); Money Supply; Real Exchange Rate; Real GDP; Interest Rate; Fiscal Balance;
    All these keywords.

    JEL classification:

    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions

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