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| Volume 4, No. 3,
December
2005 |
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Short-Run and
Long-Run Effects of Exchange Rate Volatility on the Volume of
Exports: A Case Study for Pakistan |
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A. Aurangzeb |
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Department of Economics,
University of Guelph, Canada and Social Policy and Development
Centre, Pakistan |
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Thanasis Stengos |
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Department of Economics,
University of Guelph, Canada |
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Asif U. Mohammad |
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Social Policy and
Development Centre, Pakistan |
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| Abstract |
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This paper
investigates empirically the impact of exchange rate volatility on
Pakistan’s exports to its major trading partners under the floating
exchange rate regime for the period 1985 to 2001. Estimates of the
co-integrating relations are obtained using Johansen’s technique,
and estimates of the short-run dynamics are obtained utilizing an
error-correction model. The major findings indicate that increases
in exchange rate volatility approximated by the conditional variance
of exchange rates exert a significant negative effect upon the
volume of exports in the short-run. |
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Key words:
ARCH; exchange rate volatility;
exports; error-correction model |
| JEL
classification:
F14; F31; F41 |
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