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
