Do exchange rate shocks matter for Pakistan's export performance?

Ahmed Pirzada

Bristol Economics Discussion Papers from School of Economics, University of Bristol, UK

Abstract: Pakistan experienced significant contraction in exports, together with sharp appreciation in real effective exchange rate, between 2015 and 2018. However, subsequent devaluations have only had a limited effect in reversing the trend. This has raised questions on the usefulness of exchange rate policies in promoting exports. This paper uses a Bayesian SVAR model to answer this question. I find that exchange rate shocks do have a significant effect on exports. However, the effect materialises with a lag of at least one year. The exchange rate elasticity of exports increases from close to 0 in the first quarter to 1.33 in the sixth quarter. These shocks also explain all of the slowdown in exports between 2015 and 2018.

Keywords: Bayesian SVAR; Sign Restrictions; Exchange Rate Elasticity of Exports. (search for similar items in EconPapers)
Date: 2019-04-08
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:bri:uobdis:19/711

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