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Productivity Shocks and Nominal Exchange Rate Variability: a Case Study of Pakistan


  • Zakaria, Muhammad

    () (Quaid-i-Azam University)

  • Ahmad, Eatzaz

    (Quaid-i-Azam University)


This paper empirically examines the impact of productivity shocks on nominal exchange rate movements of Pak-rupee against currencies of its major trading partners using quarterly time-series data for the flexible exchange rate period (1983Q1 to 2006Q4). By taking into account the endogeneity problem the Generalized Method of Moments (GMM) provides results that are consistent with the theoretical predictions. The results suggest that variability in bilateral nominal exchange rates is explained in part by relative productivity differentials in the tradable and nontradable sectors both at home and abroad.

Suggested Citation

  • Zakaria, Muhammad & Ahmad, Eatzaz, 2009. "Productivity Shocks and Nominal Exchange Rate Variability: a Case Study of Pakistan," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 24, pages 175-189.
  • Handle: RePEc:ris:integr:0470

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    More about this item


    nominal exchange rates; productivity; relative prices;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • F31 - International Economics - - International Finance - - - Foreign Exchange


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