Exchange rate volatility and Pakistan's import demand: An application of autoregressive distributed lag model
Faculty / School
Faculty of Business Administration (FBA)
Department of Economics
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International Research Journal of Finance and Economics
Import demand, Exchange rate volatility, Real economic growth, Pakistan, Autoregressive distributed lag approach
Econometrics | Economics | Finance
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.
Alam, S., & Ahmed, Q. M. (2010). Exchange rate volatility and Pakistan's import demand: An application of autoregressive distributed lag model. International Research Journal of Finance and Economics (48), 7-23. Retrieved from https://ir.iba.edu.pk/faculty-research-articles/74