IDEAS home Printed from https://ideas.repec.org/a/uii/journl/v11y2019i2p173-182id13507.html
   My bibliography  Save this article

Impact of macroeconomic variables on foreign exchange reserves: A case from Pakistan

Author

Listed:
  • Muhammad Azeem
  • Muzammil Khurshid

Abstract

The study aims to investigate the effect of macroeconomic indicators on foreign reserves in Pakistan. A Vector Autoregressive (VAR) model has been used to estimate Pakistan’s foreign exchange reserves demand from the period of 1984 to 2015. Findings/Originality: The results indicate that macroeconomic variables such as remittances, exchange rate, the ratio of current account deficit to GDP and interest rate differential (measure as opportunity cost) determine the country’s long-run reserves demand function. Whereas, observed results show that demand of foreign reserves is highly sensitive to capital account vulnerability and less responsive to its opportunity cost. The Granger causality analysis shows that the various macroeconomic variables fail to cause reverse causality. It implies that in Pakistan the demand of reserves is driven by macroeconomic stability. The study is helpful for the country’s institutions to boost foreign reserves by controlling macroeconomics indicators.

Suggested Citation

  • Muhammad Azeem & Muzammil Khurshid, 2019. "Impact of macroeconomic variables on foreign exchange reserves: A case from Pakistan," Economic Journal of Emerging Markets, Universitas Islam Indonesia, vol. 11(2), pages 173-182.
    • Handle: RePEc:uii:journl:v:11:y:2019:i:2:p:173-182:id:13507
    as

    Download full text from publisher

    File URL: https://journal.uii.ac.id/JEP/article/view/13507/9730
    Download Restriction: no
    ---><---

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:uii:journl:v:11:y:2019:i:2:p:173-182:id:13507. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ana Yuliani (email available below). General contact details of provider: https://journal.uii.ac.id/JEP/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.