Is Exchange Rate Effect Trade Balance in Pakistan? Evidence Based on J- Curve

Aamir Khan (), Aneel Salman () and Muhammad Khan
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Aamir Khan: COMSATS University, Islamabad, Pakistan
Aneel Salman: COMSATS University, Islamabad

International Journal of Economic Sciences, 2019, vol. 8, issue 2, 60-79

Abstract: This study aims to find out the relationship of how exchange rate effect the balance of trade in Pakistan over the period 1982-2016 within the context of J-curve phenomenon. We employed an Autoregressive Distributed Lag (ARDL) approach to cointegration. To investigate the short run dynamics of the study, we have estimated an error correction model. The unit root results provide a mix of I(0) and I(1) variables. The results of diagnostic tests indicate no econometric problem in the estimated model. The CUSUM and CUSUM of squared test confirms the stability of the estimated model. We summarize the estimated results as follow: first, we found an evidence of cointegration among the variables. Second, the long run results shows significant effect of REER on trade balance in Pakistan. Third, we found an evidence of J-curve in case of Pakistan.

Keywords: Trade Balance; Real Effective Exchange Rate; J-Curve; ARDL (search for similar items in EconPapers)
JEL-codes: F14 F31 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:sek:jijoes:v:8:y:2019:i:2:p:60-79

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