| Article Details : |
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| | | Article Name : | | | Exchange Rate Overshooting and Its Impact on
Balance of Trade: A Case of Pakistan | | Author Name : | | | ZEESHAN FAREED, BUSHRA ZULFIQAR, FARRUKH SHAHZAD, HAMID HUSSAIN | | Publisher : | | | Bridge Center | | Article URL : |  | | | Abstract : | | | This main goal of this study is to check the exchange rate
overshooting and its impact on balance of trade in Pakistan. The
annual time series data from 1971 to 2015 is used to check the short
run and long run relationship between Exchange rate overshooting
and balance of trade. We employed the autoregressive distributed lag
approach and results reveal that Exchange rate has positive and
significant relationship with balance of trade in long run and short
run. Devaluation of Pakistani rupees against USD, would increase the
exports and ultimately trade balance will enhance. The inflation and
money supply has negative and significant relationship with balance
of trade in long run in Pakistan. The excess of money supply will
increase inflation which reduces the exports and consequently, balance of trade would decrease. This study has a policy implications for
government as well as local and foreign investors. The government
should also play an important role to make such strategies which can
increase the balance of trade in Pakistan and can boost the economic
growth of Pakistan indirectly. | | Keywords : | | | Exchange rate, Balance of Trade, Inflation, Money
Supply |
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