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Appropriate Exchange Rate Regime for economic structure of Pakistan

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  • Ali, Faran
  • Mamoon, Dawood
  • Tahir, Naveed

Abstract

This study empirically finds the appropriate exchange rate regime for economic structure of Pakistan. To find long run association between exchange rate regime and its determinants; ARDL bond testing approach is concern however for the estimation of short run analysis Error correction model (ECM) is applied. Time series data is used over the period from 1984 to 2012. Findings reveal that Trade openness, foreign exchange reserves, rate of inflation and financial development are important determinant while choosing appropriate exchange-rate regime for economy having features like Pakistan. On the basis of analysis, this study suggests that both extreme ends hard peg and free float are unfavorable for it. Still, lot of attention is required on this topic. Choice of regime is a difficult task in empirical analysis because few factors cannot explain actual regime.

Suggested Citation

  • Ali, Faran & Mamoon, Dawood & Tahir, Naveed, 2016. "Appropriate Exchange Rate Regime for economic structure of Pakistan," MPRA Paper 74975, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:74975
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    More about this item

    Keywords

    Exchange Rate Regime;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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