The Asymmetric Effects of Exchange Rate Volatility on Trade Flows of Pakistan

Abstract

This research investigates the effects of asymmetric volatility exchange rate on Pakistan's trade performance with major trade
partners. The effects of exchange rate trade (import & export) by utilizing variables such as real bilateral exchange rate, bilateral exchange rate volatility, and economic activities measured for Pakistan's major trading partners from 1985 to 2020.The researcher uses non-linear ARDL and linear ARDL techniques for estimation. They also apply co-integration tests, with the F-test being used for lagged value significance and the t-test for establishing significance. The linear ARDL of export and import in the short-run reveals that exchange rate volatility positively impacts Pakistan's exports. In the long run, all the partners positively impact imports.