Do exchange rate shocks matter for Pakistan's export performance?

Research output: Working paperDiscussion paper

Abstract

Pakistan experienced significant contraction in exports, together with sharp appreciation in real effective exchange rate, between 2015 and 2018. However, subsequent devaluations have only had a limited effect in reversing the trend. This has raised questions on the usefulness of exchange rate policies in promoting exports. This paper uses a Bayesian SVAR model to answer this question. I find that exchange rate shocks do have a significant effect on exports. However, the effect materialises with a lag of at least one year. The exchange rate elasticity of exports increases from close to 0 in the first quarter to 1.33 in the sixth quarter. These shocks also explain all of the slowdown in exports between 2015 and 2018.
Original languageEnglish
Place of PublicationBristol Economics Discussion Papers
Number of pages25
Volume19/711
Publication statusUnpublished - 8 Apr 2019

Keywords

  • Bayesian SVAR; Sign Restrictions; Exchange Rate Elasticity of Exports

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