Testing asymmetry of exchange rate changes on the commodities' exports in Pakistan: a nonlinear ARDL model

Abstract

Depreciation may help in up-lifting the commodities' exports and this article finds this evidence for Pakistan. This research has investigated the impact of real effective exchange rate (REER) on Pakistan commodities' exports by using a nonlinear auto-regressive distributive lag (ARDL) co-integration developed by Shin et al. (2014) and by using a monthly series of a period of June 2003-June 2016. The long run results confirm the positive impact of world income on the most of commodities' exports. Further, depreciation of Pak rupee has been found helpful in increasing 17 out of 21 commodities' exports and appreciation has depressed the 12 out of 21 commodities' exports. Asymmetrical effects of depreciation and appreciation of exchange rate have also been found in the most of commodities' exports. Furthermore, J-curve hypothesis has been found in the 13 out of 21 commodities' exports. This study recommends the devaluation of Pak rupee to increase commodities' exports.