Impact of exchange rate depreciation on domestic output in Pakistan

Authors

Muhammad Afzal, COMSATS Institute of Information Technology, Islamabad, Pakistan

Abstract

There is disagreement on the desirability of devaluation in the LDCs. Since the de-linking from USA dollar in January 1982, the Pakistan rupee has been losing its value vis-à-vis US dollar and other important currencies. The purpose of the paper was to see the response of domestic output to fiscal and monetary policies besides exchange rate and terms-of-trade. These policies have stable and long- run relationship with the domestic output. However, the impact of money supply and exchange rate is more robust than the other variables. Easy monetary policy has a favourable impact on domestic output. Fiscal discipline is the need of the hour because persistent and large budget deficit breeds inflation.

Keywords

Depreciation, Output, Cointegration, Causality, Pakistan

DOI

https://doi.org/10.54784/1990-6587.1194

Journal of Economic Literature Subject Codes

F32 E0, E6

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

Recommended Citation

Afzal, M. (2011). Impact of exchange rate depreciation on domestic output in Pakistan. Business Review, 6(2), 80-89. Retrieved from https://doi.org/10.54784/1990-6587.1194