Re-estimation of Keynesian Model by Considering Critical Events and Multiple Cointegrating Vectors

Hina, Hafsa; Qayyum, Abdul

doi:10.30541/v54i2pp.123-145

Cited by 3 publications

(2 citation statements)

References 46 publications

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“…The majority of our series exhibit linear trends. The intercept component is freely added in cointegration analysis in both the long-run (cointegration portion) and short-run (VAR) models, according to Hina and Qayyum (2015). The trace…”

Section: Results Of the Import Demand Functionmentioning

confidence: 99%

Depreciation to correct trade deficit- a misdirected policy: Empirical evidence from Pakistan

Hina

Hye²,

Ul-Haq

2023

5009

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A favorable trade balance is a positive indicator for emerging economies, and rectifying trade imbalances is paramount for every country. However, fixing trade deficits by depreciating the currency is a misguided policy approach. This study refutes this myth by computing the elasticity of Pakistan's exports, imports, and trade balance using the real exchange rate. It also examines the degree to which trade elasticities respond to changing trade regimes and exchange rate policies in Pakistan from 1982 to 2019. The structural break cointegration technique is used for empirical analysis. The vector error correction model (VECM) is also employed in the study to establish long-run and short-run relationships. The findings show that depreciation boosts import demand rather than export demand, hence worsening the trade balance. As a result, the study dismisses the presence of the J-curve in the case of Pakistan. According to this analysis, the exchange rate policy has little bearing on the economy's structure, and the necessity for a devaluation results from economic structural inefficiencies rather than trade-enhancing policies. The government and policymakers should reform the economy rather than let the currency depreciate.

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Section: Results Of the Import Demand Functionmentioning

confidence: 99%

Depreciation to correct trade deficit- a misdirected policy: Empirical evidence from Pakistan

Hina

Hye²,

Ul-Haq

2023

5009

View full text Add to dashboard Cite

show abstract

“…The available literature mainly considered the role of external factors, like terms of trade and remittances in studying the exchange rate behaviour [Haque and Montiel (1992); Chisti and Hasan (1993); Afridi (1995); Siddiqui, et al (1996); Bhatti (1996) ;Zakaria, et al (2007); among others]. Few studies have examined the behaviour of nominal exchange rate, by considering the PPP hypothesis or variant of monetary and Keynesian models of exchange rate determination [Hina and Qayyum (2015); Khan and Qayyum (2011); Zakaria and Ahmad (2009); among others]. However, majority of these studies do not analyse dynamic interaction between exchange rate and monetary fundamentals, which give important policy implications about the reaction of exchange rate with regard to the monetary factors.…”

Section: Introductionmentioning

confidence: 99%

Does Pak-Rupee Exchange Rate Respond to Monetary Fundamentals? A Structural Analysis

Khan¹,

Nawaz²

2018

PDR

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This study empirically examines the contribution of monetary fundamentals in explaining nominal exchange rate movements in the case of Pak-rupee vis-à-vis US-dollar over the period 1982Q2 to 2014Q2. The empirical results support the existence of cointegration relationship between nominal exchange rate and monetary fundamentals. The results reveal that relative money stocks and real income are the key drivers of exchange rate determination in Pakistan in the long-run. For dynamic interaction, the Structural Vector Autoregressive (SVAR) method is applied. Results from the SVAR show that the responses of exchange rate to shocks, originated from money supply, income, interest rate and inflation differentials, are consistent with the predictions of the flexible-price variant of the monetary model of exchange rate in the short-run. More specifically, the results indicate that inflation and interest rate differential explain maximum variations in exchange rate in the short-run. In essence, results suggest that monetary fundamentals are the key drivers of exchange rate fluctuations in Pakistan, especially in the short-run. JEL Classification: F31, F33, C32, F41 Keywords: Monetary Model, Exchange Rate, SVAR, Pakistan

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Comprehensive Evaluation of Water–Energy–Food System Security in the China–Pakistan Economic Corridor

Cao

Chen

Duan

et al. 2022

Water

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The safety of the water–energy–food (WEF) system in the China–Pakistan Economic Corridor (CPEC) is critical to the sustainable development of resources, the economy, and society in the region. This paper uses the projection pursuit model of a real-code accelerated genetic algorithm (RAGA-PP) to comprehensively evaluate the WEF system security of the CPEC for the period 2000–2016. The results show that from 2000 to 2016, the projection value of the WEF system was reduced from 2.61 to 0.53, and the overall system security showed a downward trend. Moreover, the CPEC increased by 6.13 × 107 people, resulting in a rapid decrease in per capita water resources and decreased security of the water resources subsystem. With the rising social and economic development in recent years, the per capita energy consumption has likewise risen, leading to a decline in the energy subsystem. At the same time, the per capita grain output in the study area has increased from 185 to 205 kg, and the safety of the food subsystem has been enhanced. However, the significant increase in irrigated areas (from 1.82 × 1010 to 1.93 × 1010 hectares) has further highlighted the contradiction between the supply and demand of surface water resources, and the number of tube wells increased by 7.23 × 105, resulting in the consumption of a large amount of electricity and diesel resources. The water–energy (WE) subsystem also became less safe. With the implementation of water resources management policies over the past few decades, the proportion of agricultural water consumption dropped from 95.06% in 2000 to 93.97% in 2016, and the safety of the water–food (WF) subsystem increased. Unfortunately, agricultural irrigation consumes a large amount of power resources, leading to a reduction in the security of the energy–food (EF) subsystem. The research results from the present study could provide a scientific basis for the coordinated development of WEF systems across the CPEC region.

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Re-estimation of Keynesian Model by Considering Critical Events and Multiple Cointegrating Vectors

Cited by 3 publications

References 46 publications

Depreciation to correct trade deficit- a misdirected policy: Empirical evidence from Pakistan

Depreciation to correct trade deficit- a misdirected policy: Empirical evidence from Pakistan

Does Pak-Rupee Exchange Rate Respond to Monetary Fundamentals? A Structural Analysis

Comprehensive Evaluation of Water–Energy–Food System Security in the China–Pakistan Economic Corridor

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