• ISSN: 2010-023X
    • Frequency: Bimonthly
    • DOI: 10.18178/IJTEF
    • Editor-in-Chief: Prof.Tung-Zong (Donald) Chang
    • Executive Editor: Ms. Cherry L. Chen
    • Abstracting/ Indexing: Engineering & Technology Digital Library, ProQuest, Crossref, Electronic Journals Library, DOAJ , EBSCO, and Ulrich's Periodicals Directory
    • E-mail: ijtef@ejournal.net
IJTEF 2012 Vol.3(6): 428-431 ISSN: 2010-023X
DOI: 10.7763/IJTEF.2012.V3.239

Effects of Policy Uncertainty on Nominal Rupee-Dollar Exchange Rate in Pakistan

Abdul Waheed
Abstract—This study first attempts to identify the determinants of nominal rupee-dollar exchange rate in Pakistan. Apart from providing theoretical explanation on possible determinants of nominal rupee-dollar exchange rate, the study tests their statistical significance using Cointegration modeling approach. It finds that the relative price, domestic output, current account balance, exports, financial deepening, interest rate differential, and budget deficit turn out to be statistically significant determinants of nominal rupee dollar exchange rate in Pakistan. Furthermore, this paper also analyzes the effects of policy uncertainty on exchange rate behavior using GARCH model. It finds that uncertainty related to output, current account deficit, budget deficit, external debt, and domestic investment contributes to the volatility of nominal rupee-dollar exchange rate in Pakistan.

Index Terms—Nominal exchange rate, time series model, policy uncertainty.

The author is with the Department of Economics, University of Karachi, Karachi-75270, Pakistan (e-mail:waheedku@yahoo.com).

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Cite:Abdul Waheed, "Effects of Policy Uncertainty on Nominal Rupee-Dollar Exchange Rate in Pakistan," International Journal of Trade, Economics and Finance vol.3, no.6, pp. 428-431, 2012.

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