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The Impact of Exchange Rate Volatility on Trade

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dc.contributor.author Abdul Jalil Khan
dc.contributor.author Parvez Azim
dc.contributor.author Shabib Haider Syed
dc.date.accessioned 2014-10-16T06:07:18Z
dc.date.available 2014-10-16T06:07:18Z
dc.date.issued 2014-06
dc.identifier.citation The Lahore Journal of Economics Volume 19, No.1 en_US
dc.identifier.issn 1811-5438
dc.identifier.uri http://121.52.153.179/Volume.html
dc.identifier.uri http://hdl.handle.net/123456789/7068
dc.description PP.36 ;ill en_US
dc.description.abstract This study investigates the impact of domestic and foreign currency-valued exchange rate volatility on the export and import demand functions with reference to Pakistan’s trading partners. We use GARCH-based exchange rate volatilities and the least-squares dummy variable technique with fixed-effects estimation to measure the volatility impact on both demand functions. The study evaluates a series of exchange rates from 1970:01 to 2009:12 to compare the long-run impact of volatility with that of the short run. The results show that, when Pakistan employed the US dollar as the vehicle currency with its trading partners, volatility discouraged both imports and exports. In contrast, both the import and export demand functions remained unaffected by volatility distortions when Pakistan traded with its developing partners using bilateral exchange rates valued in domestic currency terms. In policy terms, this implies that Pakistan should opt for direct domestic currency when trading with middle- and low-income countries en_US
dc.language.iso en en_US
dc.publisher © The Lahore School of Economics en_US
dc.subject GARCH models en_US
dc.subject foreign exchange markets en_US
dc.subject volatility en_US
dc.title The Impact of Exchange Rate Volatility on Trade en_US
dc.title.alternative A Panel Study on Pakistan’s Trading Partners en_US
dc.type Article en_US


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