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Do exchange rate shocks matter for Pakistan's export performance?

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  • Ahmed Pirzada

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.

Suggested Citation

  • Ahmed Pirzada, 2019. "Do exchange rate shocks matter for Pakistan's export performance?," Bristol Economics Discussion Papers 19/711, School of Economics, University of Bristol, UK.
    • Handle: RePEc:bri:uobdis:19/711
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    Cited by:

    1. Brun, Martin & Gambetta, Juan Pedro & Varela, Gonzalo J., 2022. "Why do exports react less to real exchange rate depreciations than to appreciations? Evidence from Pakistan," Journal of Asian Economics, Elsevier, vol. 81(C).
    2. Brun,Martin & Gambetta,Juan Pedro & Varela,Gonzalo J., 2020. "Slow Rockets and Fast Feathers or the Link between Exchange Rates and Exports : A Case Study for Pakistan," Policy Research Working Paper Series 9353, The World Bank.

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