Research Article 25
Journal of Finance & Economics Research - Volume 9, Issue 1 2024
By Amanat Ali, Syed Muhammad Saddiq, Amna Bibi
10.20547/jfer2409104
Keywords: Exchange rate, GDP, PARDL, Trade balance, Consumer Price Index.

The present research study examines the response of exchange rate changes on the trade balance of Pakistan, in its major trading partners e-i., United States, China, United Kingdom, Saudi Arabia, Japan, Germany, Malaysia, and Singapore. Data has been taken from the World Development Indicator and the International Trade Centre for the time 2003 to 2021. To estimate the data, we applied the Panel Autoregressive Distributed Lags model. The findings of the study show that in the short run, the Exchange rate, and Consumer Price Index don't seem to have a significant impact on the Trade Balance, while the GDP demonstrates a statistically significant and positive impact on the Trade Balance. However, we are more interested in the long-run results showing that exchange rate volatility has significant negative impacts on the trade balance of Pakistan when they are involved in the trade. Additionally, the long-term trade balance dynamics were influenced by the positive effects of GDP and the negative impact of inflation.

Submission Date: 15 Sep, 2023 Reviews Completed: 21 Dec, 2023
Acceptance Date: 5 Jan, 2024 Publication Date: 12 Jan, 2024