Real Exchange Rate Changes and the Trade Balance: The Evidence from Pakistan

Shahbaz, Muhammad; Jalil, Abdul; Islam, Faridul

doi:10.1080/08853908.2012.657588

Cited by 48 publications

(40 citation statements)

References 44 publications

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“…J-curve (Shahbaz et al [16]); devaluation and economic growth (Shahbaz et al [17]); financial development, foreign direct investment and economic growth (Shahbaz and Rahman, [18]); trade openness and economic growth (Shahbaz,[19]) 1 and, money supply and interest rate (Khattak et al. [21]).…”

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confidence: 99%

Analyzing time–frequency relationship between oil price and exchange rate in Pakistan through wavelets

Shahbaz

Tiwari

Tahir

2014

Journal of Applied Statistics

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Abstract:This study analyzes the time-frequency relationship between oil price and exchange rate for Pakistan by using measures of continuous wavelet such as wavelet power, cross-wavelet power, and cross-wavelet coherency. The results of cross-wavelet analysis indicate that covariance between oil price and exchange rate are unable to give clear-cut results but both variables have been in phase and out phase (i.e. they are anti-cyclical and cyclical in nature) in some or other durations. However, results of squared wavelet coherence disclose that both variables are out of phase and real exchange rate was leading during the entire period studied, corresponding to the 10~15 months scale. These results are the unique contribution of the present study, which would have not been drawn if one would have utilized any other time series or frequency domain based approach. This finding provides evidence of anti-cyclical relationship between oil price and real effective exchange rate. However; in most of the period studied, real exchange rate was leading and passing anti-cycle effects on oil price shocks which is the major contribution of the study.

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confidence: 99%

Analyzing time–frequency relationship between oil price and exchange rate in Pakistan through wavelets

Shahbaz

Tiwari

Tahir

2014

Journal of Applied Statistics

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“…Conversely, using bilateral trade flows, there was confirmation of noteworthy short and long run effects of currency depreciation on the trade balance between Pakistan and her trade partners no less than in six cases, whereas there was no substantial effect found between Pakistan and the US in both periods. Similarly, other studies have been conducted by many researchers including [2], [26], [27] and [28], etc. and have tested the impact of currency depreciation on the trade balance between Pakistan and her trade partners.…”

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Empirical Evidence on the J-Curve Between Pakistan and Selected South Asian Trade Partners

Khalid¹

2017

EBM

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Abstract:The earlier researches investigated the J-curve hypothesis along with the Marshall-Lerner condition in Pakistan used the OLS, 2SLS, 3SLS, and Instrumental Variables (IV) techniques. The estimates obtained from these studies may suffer from spurious regression problems as the models were estimated without incorporating the co-integrating property of the variables. Hence, the objective of this work is to analyze the trade balance model using relatively the new co-integration approach, the ARDL model. The J-curve phenomenon is tested for Pakistan's trade with her selected South Asian trade partners, including Republic of India and Democratic Socialist Republic of Sri Lanka using the annual time series data over the 1975-2013 periods. After empirical analysis, it was observed that the J-curve occurrence is rejected in favor of Pakistan with its trading partners. This study concludes that depreciation of Pakistani Rupee has a constructive result on Pakistan's trade with these trade partners.

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“…Therefore, managing exchange rate is one of the most important issues for developing countries. According to the conventional approach, currency devaluation improves the trade balance in long-run (Shahbaz et al 2011(Shahbaz et al , 2012a. However, trade balance is worsened in short run initially and then improves which is called that trade balance is followed the J-curve phenomenon (Matesanz and Fugarolas, 2009 (Halicioglu, 2008;Bahmani-Oskooee and Ratha, 2004a).…”

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confidence: 99%

Does J-curve phenomenon exist in case of Laos? An ARDL approach

2013

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This study aims to test the existence of J-curve phenomenon in Laos economy using quarterly data over the period of 1993-2010. The ARDL bounds testing approach to cointegration is used to examine short run as well as long run impact of real depreciation of Lao kip on Lao trade balance. The empirical results suggest that there is J-curve effect in case of Laos. The impact of real depreciation of the Lao kip on Lao trade balance is insignificant in long run. In short-run, real depreciation has inverse impact on Lao's trade balance. The long-run trade balance is determined by domestic income.

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Real Exchange Rate Changes and the Trade Balance: The Evidence from Pakistan

Cited by 48 publications

References 44 publications

Analyzing time–frequency relationship between oil price and exchange rate in Pakistan through wavelets

Analyzing time–frequency relationship between oil price and exchange rate in Pakistan through wavelets

Empirical Evidence on the J-Curve Between Pakistan and Selected South Asian Trade Partners

Does J-curve phenomenon exist in case of Laos? An ARDL approach

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