An Analysis of Exchange Rate, J Curve and Debt Burden in Pakistan: An Analysis of Bound Testing

Hina Ali, Ramzan Sheikh, Laraib Abrar



Rate of exchange is a significant monetary variable that control balance of trade. J curve theory explains that depreciation in domestic currency wills sure that foreign goods costly for the domestic persons and domestic goods are inexpensive for the other country. In this result, imports will reduce and exports will rises. Therefore, trade balance would be improved. This theory proved that J curve have no exist in Pakistan because imports of Pakistan contains a large numbers of necessities and this imports present no movement in exchange rate. Therefore, rate of exchange and balance of trade both have negative relationship. Debt and GDP have positive related with each other because Government of Pakistan takes the debt to promote the economic growth. This study opens new perspectives for the decision makers.


Exchange Rate, Debt, Gross Domestic Product, Debt Burden, Pakistan

Full Text:



Aftab, Z., & Khan, S. (2008). Bilateral J-curves between Pakistan and her trading partners (No. 2008: 45). Pakistan Institute of Development Economics.

Afzal, M., ur Rehman, H., & ur Rehman, J. (2008). Causal nexus between economic growth, export and external debt servicing: The case of Pakistan. Retrieved December, 14, 2009.

Ali, A. (2009). The impact of financial crisis on Pakistani economy. Institute of Strategic Studies Islamabad, 4(1), 106-117.

Ali, R., & Mustafa, U. (2012). External debt accumulation and its impact on economic growth in Pakistan. The Pakistan Development Review, 79-95.

Arize, A. C., Osang, T., & Slottje, D. J. (2000). Exchange-rate volatility and foreign trade: evidence from thirteen LDC's. Journal of Business & Economic Statistics, 18(1), 10-17.

Boyd, D., Caporale, G. M., & Smith, R. (2001). Real exchange rate effects on the balance of trade: cointegration and the Marshall–Lerner condition. International Journal of Finance & Economics, 6(3), 187-200.

Jakob, B. (2016). Impact of Exchange Rate Regimes on Economic Growth. Undergraduate Economic Review, 12(1), 11.

Kandil, M., & Mirzaie, I. (2005). The effects of exchange rate fluctuations on output and prices: evidence from developing countries. The Journal of Developing Areas, 189-219.

Lane, P. R., & Milesi-Ferretti, G. M. (2002). External wealth, the trade balance, and the real exchange rate. European Economic Review, 46(6), 1049-1071.

Lane, P. R., & Milesi-Ferretti, G. M. (2003). International financial integration. IMF Staff Papers, 50(1), 82-113.

Mendoza, E. G. (1995). The terms of trade, the real exchange rate, and economic fluctuations. International Economic Review, 101-137.

Mirzaie, I. A., & Mrs. Magda E. Kandil. (2003). The Effects of Exchange Rate Fluctuations on Output and Prices: Evidence from Developing Countries.

Obstfeld, M., & Rogoff, K. S. (2005). Global current account imbalances and exchange rate adjustments. Brookings papers on economic activity, 2005(1), 67-146.

Onafowora, O. (2003). Exchange rate and trade balance in East Asia: is there a J-curve. Economics bulletin, 5(18), 1-13.

Rehman, H. U., & Afzal, M. (2003). The J curve phenomenon: an evidence from Pakistan. Pakistan economic and social review, 45-58.

Tenreyro, S. (2007). On the trade impact of nominal exchange rate volatility. Journal of Development Economics, 82(2), 485-508.


  • There are currently no refbacks.

Copyright (c) 2018 International Journal of Experiential Learning & Case Studies

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.