Exchange rate misalignment in Pakistan and its general equilibrium distributional implications

Dario Debowicz () and Wajiha Saeed

No 16, PSSP working papers from International Food Policy Research Institute (IFPRI)

Abstract: Recent findings in the growth literature suggest that developing countries need to keep a devalued exchange rate to stimulate their economic growth. Building on these findings, we econometrically evaluate to what ex-tent the real exchange rate of Pakistan has been aligned with its economic fundamentals, and find that the Pa-kistan rupee has been significantly and systematically overvalued during the last years. We then simulate the general equilibrium effects of an eventual re-alignment of the real exchange rate with economic fundamen-tals, and find not only an expected increase in the relative size of the tradable sector - where productivity in-creases tend to be faster – but also an associated improvement in the income of the poorest groups.

Keywords: economic growth; markets; computable general equilibrium models; trade; exchange rate; Pakistan; Southern Asia; Asia (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cmp and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://hdl.handle.net/10568/151464

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fpr:psspwp:16

Access Statistics for this paper

More papers in PSSP working papers from International Food Policy Research Institute (IFPRI) Contact information at EDIRC.
Bibliographic data for series maintained by ().