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The asymmetric effects of exchange rate volatility on US–Pakistan trade flows: new evidence from nonlinear ARDL approach

Author

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  • Javed Iqbal

    (Quaid-i-Azam University)

  • Sabahat Aziz

    (Quaid-i-Azam University)

  • Misbah Nosheen

    (Hazara University)

Abstract

Earlier studies that examined the response of trade flows to exchange rate volatility relied on the assumption that increased volatility and decreased volatility behave in a symmetric way; however, due to change in expectations of traders toward increasing volatility and decreasing volatility, the effects could be asymmetric; hence, the empirical results of these studies are supposed to have masked by the restricted assumption of symmetry between exchange rate and trade flows. This study investigates both the symmetric and asymmetric effects of exchange rate volatility on trade flows between Pakistan and USA at industry level over the period 1981–2018. We find evidence of a significant effect of asymmetric exchange rate volatility on trade flows in almost one-half (1/2) of importing and exporting industries of Pakistan that trade with the USA both in the short run and in the long run.

Suggested Citation

  • Javed Iqbal & Sabahat Aziz & Misbah Nosheen, 2022. "The asymmetric effects of exchange rate volatility on US–Pakistan trade flows: new evidence from nonlinear ARDL approach," Economic Change and Restructuring, Springer, vol. 55(1), pages 225-255, February.
    • Handle: RePEc:kap:ecopln:v:55:y:2022:i:1:d:10.1007_s10644-020-09310-8
    DOI: 10.1007/s10644-020-09310-8
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    Cited by:

    1. Adeel Saleem & Maqbool H. Sial & Ahmed Raza Cheema, 2023. "Does an asymmetric nexus exist between exports and economic growth in Pakistan? Recent evidence from a nonlinear ARDL approach," Economic Change and Restructuring, Springer, vol. 56(1), pages 297-326, February.
    2. Mohsen Bahmani-Oskooee & Augustine C. Arize & Ebere Ume Kalu, 2023. "On the asymmetric effects of exchange rate volatility on the U.S. Bilateral Trade with its 12 South American partners," Economic Change and Restructuring, Springer, vol. 56(2), pages 701-732, April.

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