A Note on Trade-Weighted Over-Valuation of the Pakistan Rupee

M. L. Qureshi, Surraiya Nishat

Abstract


The Pakistan rupee was devalued from Rs. 4.76 to a US dollar
to Rs. 11.00 to a US dollar in May 1972 and was revalued to Rs. 9.90 to
a US dollar in February 1973. The dollar has depreciated substantially
since then in relation to certain currencies such as the Swiss franc,
Deutsche mark, yen and the guilder. It is generally believed that the
Pakistan rupee, because of its link with the dollar, has depreciated not
only against the above currencies but also in an overall sense so that
the rupee has been defacto devalued. An attempt has been made in this
note to find out whether the rupee has been defacto devalued or
over-valued. The dollar has no doubt depreciated against some strong
currencies. But certain other currencies such as the pound sterling, the
French franc and the Italian lira have depreciated more than the dollar
so that relatively the dollar has appreciated in terms of these
currencies. The Pakistan rupee, which fol¬lowed the dollar, has
depreciated against certain currencies and appreciated against
others.

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DOI: https://doi.org/10.30541/v17i2pp.248-252

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