Exchange rate volatility and Pakistan's import demand: An application of autoregressive distributed lag model

Author Affiliation

Qazi Masood Ahmed is Professor & Director CBER at Institute of Business Administration (IBA), Karachi

Faculty / School

Faculty of Business Administration (FBA)

Department

Department of Economics

Was this content written or created while at IBA?

Yes

Document Type

Article

Source Publication

International Research Journal of Finance and Economics

ISSN

1076-9307

Disciplines

Econometrics | Economics | Finance

Abstract

The present study estimated the import demand function for Pakistan covering quarterly period 1982:Q1 to 2008:Q2 by employing ARDL approach. The result from ARDL analysis, support the hypothesis that in Pakistan there exist a long run relationship among, import demand, real economic growth, relative price of imports, real effective exchange rate and volatility of real effective exchange rate. It found that aggregate import demand is positively affected by real gross domestic product suggesting that import demand in Pakistan is growth driven. Further it found that relative price of imports may not decrease the import demand, which is quite obvious for growth driven economy. It also found that real depreciation of local currency and volatility of real effective exchange rate has no effect to decrease import demand in Pakistan in the long run. The evidence based on short run dynamic tends to indicate that real economic growth, relative price of imports, real effective exchange rate and real effective exchange rate volatility Granger cause import demand in the short-run.

Indexing Information

Scopus

Publication Status

Published

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