The Long-run and Short-run Impact of Exchange Rate Devaluation on Pakistan’s Trade Performance

Zehra Aftab, Aurangzeb .


In estimating trade elasticities for Pakistan, most previous
researchers have employed non-stationary data and OLS or 2SLS
techniques. In this paper we use Johansen’s cointegration methodology to
re-investigate the long-run trade elasticities and existence of the
Marshall-Lerner condition. Using quarterly data, the trade performance
with Pakistan’s ten major trading partners is empirically tested.
Moreover, we also investigate the short-run exchange rate dynamics by
constructing an error-corrrection model to trace the j-curve.

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