EFFECTS OF EXCHANGE RATE VARIATIONS ON ECONOMIC GROWTH, PRICES AND ITS IMPACT ON RESERVES OF FOREIGN EXCHANGEIN PAKISTAN (1975-2010)

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dc.contributor.authorAman Ullah
dc.contributor.authorSupervised by Dr.Muhammad Naeem
dc.date.accessioned2025-02-19T04:34:43Z
dc.date.available2025-02-19T04:34:43Z
dc.date.issued2015
dc.description.abstractA stable exchange rate plays a significant role in the settlement of major macroeconomic variables like output, price level and foreign exchange reserves. Whereas, its instability hinders investment, trade flow and economic growth in an economy.It also provides additional aggregate demand and supply transmission channels which help in the implementation of suitable monetary policy. Exchange rate is determined by a numberoffactors, the identification of which can be useful for maintaining economic stability and solving monetary problems. Among the developing countries, Pakistan experienced a unique downward trend in rupee value and frequent transitions in the exchange rate systems. These distinctive features make Pakistan economy an interesting case study for the empirical examination of the rupee exchange rate and its role in the monetary policy and macroeconomic performance. The purpose of the present study is to find out which of the macroeconomic indicators has led the Pak-rupee Real Exchange Rate (RER) depreciations during the study period. Moreover, the role of the RER in a Taylor rule based monetary policy of the State Bank of Pakistan (SBP) has also been analyzed. Likewise, the impact of RER on output has been examined in an open economy IS curve framework for testing the contractionary hypothesis of real devaluations in Pakistan. Also, the influence ofthe RER on inflation has been investigated in the framework of an open economyPhillips curve approach. Furthermore, the effect of the RER on foreign exchange reserves has also been studied in the framework of a mercantilist approach. Finally, the relationship of the different exchange rate systems with the RER, monetary policy, output, price level and foreign exchangereserves have also been explored. Time series annual data covering the period 1975 to 2010 has been used for the empirical analysis. Augmented Dickey Fuller test has been used for checking the unit root in the data. Hodrick Prescott filter method has been applied for extracting the cyclical components from the observed series. Ordinary Least Squares method is used for the estimation of regression equations. The overall significance of the models has been analyzed by using Wald test. For avoiding the problemsofspurious relationship between the variables and series implications for the standard errors and Durbin Watsonstatistic, Newy-West test has been applied. Thereliability of the results has been confirmed by using the Diagnostic tools i.e. Q-statistic and LM test. CUSUMstability tests are used for checking the stability ofthe parameters and regression variances.
dc.identifier.urihttp://repository.uop.edu.pk/123456789/379
dc.language.isoen_US
dc.publisherDepartment of Economics, University of Peshawar. Khyber Pakhtunkhwa, Pakistan
dc.relation.ispartofseriesTh-14776
dc.titleEFFECTS OF EXCHANGE RATE VARIATIONS ON ECONOMIC GROWTH, PRICES AND ITS IMPACT ON RESERVES OF FOREIGN EXCHANGEIN PAKISTAN (1975-2010)
dc.typeThesis
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