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Exchange Rate Volatility and Money Demand: An Empirical Analysis of Pakistan

Author

Listed:
  • Muhammad Qasim

    (Ph.D. scholar at National College of Business Administration and Economics (NCBA&E), Lahore, Pakistan)

  • Khalil Ahmad

    (Lecturer in Economics, Islamia College Civil Lines Lahore, Pakistan)

  • Muhammad Irfan Chani

    (Assistant Professor, Department of Management Sciences, COMSATS University Islamabad, Vehari Campus, Pakistan)

Abstract

The main objective of this study is to investigate the impact of foreign exchange rate volatility on money demand in Pakistan. For this purpose disaggregate expenditure approach use to construct money demand function. For empirical estimation Autoregressive Distributed Lag (ARDL) approach is employed to investigate the co-integration among the money demand, exchange rate volatility, investment expenditure, consumption expenditure, government expenditure and inflation. The long run results show that household’s consumption expenditures, investment expenditure and inflation has positive and significant relationship with money demand in case of Pakistan. On the other hand, the long run results relating to government expenditures and exchange rate volatility show negative and significant impact on money demand.

Suggested Citation

  • Muhammad Qasim & Khalil Ahmad & Muhammad Irfan Chani, 2021. "Exchange Rate Volatility and Money Demand: An Empirical Analysis of Pakistan," Journal of Policy Research (JPR), Research Foundation for Humanity (RFH), vol. 7(1), pages 15-25, March.
    • Handle: RePEc:rfh:jprjor:v:7:y:2021:i:1:p:15-25
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Exchange Rate volatility; Inflation; Money Demand;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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