Exchange Rate Determination: Testing the Monetary Approach to Exchange Rate Determination: The Case of Pakistan - Softcover

Khan, Muhammad Arshad

Softcover

ISBN 10: 3639231198 ISBN 13: 9783639231199

Publisher: VDM Verlag Dr. Müller, 2010

Synopsis

This study examines the long-run relationship between Pak-rupee vis-à-vis US-dollar exchange rate, relative money supplies, real income, nominal interest rates, and real exchange rate over the period 1982Q2 to 2005Q4. The presence of cointegration between exchange rate, monetary fundamentals and relative real prices implies that monetary fundamentals and real factors play a significant role in determining the exchange rate. The results also ssuggestthat monetary fundamentals are still important in determining the exchange rate dynamics. Furthermore, during the reforms period the results of the monetary model appear to be highly consistent with the predictions of monetary model and short-run behaviour of monetary fundamentals is highly responsive. Based on the empirical findings, we derived two main conclusions: the monetary approach to exchange rate is still a valid representation in the determination of long-run exchange rates behaviour. Second, besides the monetary factors, real factors play a significant role in the determination of exchange rate in Pakistan.

Edition details

• Publisher: VDM Verlag Dr. Müller
• Publication date: 2010
• Language: English
• ISBN 10: 3639231198
• ISBN 13: 9783639231199
• Binding: Paperback
• Number of pages: 272