The Implication of the Oscillations in Exchange Rate for the Commodity-wise Trade Flows between Pakistan and China: An Evidence from ARDL Approach

Muhammad Zubair Chishti, Javed Iqbal (), Farrukh Mahmood () and Hafiz Syed Muhammad Azeem ()
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Muhammad Zubair Chishti: School of Busniess, Zhengzhou University, Henan, China
Javed Iqbal: School of Economics, Quaid-i-Azam University, Islamabad 45320, Pakistan
Farrukh Mahmood: Pakistan Institute of Development Economics (PIDE), P.O. Box 1091, Islamabad 44000, Pakistan
Hafiz Syed Muhammad Azeem: Finance Division, Government of Pakistan, Pak Secretariat, Islamabad, Islamabad Capital Territory 44000, Pakistan

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2020, vol. 23, issue 04, 1-33

Abstract: This study intends to explore the impact of oscillations in the exchange rate on commodity-wise trade flows between Pakistan and its major trading partner China, while employing the annual data for 1982–2017. Applying the ARDL bounds testing approach, this study confirms that 94% of the selected exporting and 86% of the chosen importing industries possess “cointegration”. Further, the findings reveal that 81%, in the short run, and 52%, in the long run, of exporting industries respond to the volatile exchange rate. Moreover, the volatility affects 77%, in the short run, while 65%, in the long term, of the importing industries. Fascinatingly, the findings also indicate that a major shareholder exporting industry coded as 651 (“Textile yarn and thread” with 57% share) gets benefitted from the volatile exchange rate.

Keywords: Volatile exchange rate; commodity-wise data; ARDL approach; Pakistan; China (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1142/S0219091520500307

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