Factors Affecting the Nominal Exchange Rate of Pakistan: An Econometric Investigation (1982-2008)

Naeem Ur Rehman Khattak, Muhammad Tariq and Jangraiz Khan

Asian Economic and Financial Review, 2012, vol. 2, issue 2, 421-428

Abstract: Which macroeconomic factors determine the nominal exchange rate of Pak-rupee against US dollar during the period 1982-2008? This issue has been investigated in this paper by using Ordinary Least Squares and Johansen’s Cointegration techniques. The results show that both monetary and real factors i.e. money supply, trade balance, foreign exchange reserves, inflation and interest rate have long run relationship with the exchange rate of Pak-rupee. However, the granger causality test results show that the relationship between most of the macroeconomic variables and nominal exchange rate bi-directional.

Keywords: Nominal Exchange Rate; Co integration; Granger Causality test (search for similar items in EconPapers)
Date: 2012
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