Effects of Exchange Rate Variations on Imports and Exports: A Case Study of Pakistan

Abstract

This study examines the impact of exchange rate fluctuation on Pakistan's exports and imports throughout 2000 to 2019. The current study uses a non-probabilistic approach for the sample selection. Descriptive statistics are used in order to assess the data based on mean, medium, and standard deviation; however, regression analysis is used to analyze the relationship between variables. The purpose of this study is to investigate whether trade flows are influenced by exchange rate volatility symmetrically or asymmetrically, as the exchange rate variations have shown an empathic impact on the economies of developing nations in the past years. The existing study investigates the effect of currency fluctuation in the context of Pakistan. It is generally recommended that policymakers in Pakistan consider the existence and degree of exchange rate volatility as well as the predicted impact of this volatility on specific macroeconomic variables when implementing trade strategies. This will allow for increased trade and foreign direct investment potential. The results of the study show that there is a substantial correlation between exports and exchange rates, with a t-statistics value of 2.01 for the independent variable of currency rates. We find that the exchange rate significantly affects the exports and imports of Pakistan. As the results show, currency fluctuation does affect the imports and exports, so automatically, the economic growth of the country is concerned. Inflation and interest rates are taken as control variables in the existing article.