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 language | English |
|---|---|
| Place of Publication | Bristol Economics Discussion Papers |
| Number of pages | 25 |
| Volume | 19/711 |
| Publication status | Unpublished - 8 Apr 2019 |
Keywords
- Bayesian SVAR; Sign Restrictions; Exchange Rate Elasticity of Exports