DYNAMICS OF NOMINAL EXCHANGE RATE WITH PRICE LEVELS: WHAT HAPPENS IN INTERNATIONAL MARKETS?

  • Taqqadus Bashir MS Scholar University of Gujrat
  • Aaqiba Javed MS Scholar University of Gujrat
  • Ali Raza MS Scholar University of Gujrat
  • Muhammad Arif Ali MS Scholar University of Gujrat
  • Anam Ameer Ali MS Scholar University of Gujrat
  • Marria Hassan MS Scholar International Islamic University Islamabad

Abstract

Since inception exchange rate determination in Pakistan has been studied extensively but under various approaches. Current study explores empirically the relationship of the domestic price level & foreign price level with nominal exchange rate in Pakistan, using a daily data set for 13 years (July 2000- June 2013) as provided by State Bank of Pakistan. Variables are analyzed for stochastic properties and existence of unit root, for this purpose ADF is used. Along with regression analysis the co-integration is tested to detect long term co-movement between variables. It has been found that domestic price level has positive relationship with nominal exchange rate, whereas, foreign price level has a negative relationship with nominal exchange rate in the long run.

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Published
2013-11-30
How to Cite
Bashir, T., Javed, A., Raza, A., Ali, M. A., Ali, A. A., & Hassan, M. (2013). DYNAMICS OF NOMINAL EXCHANGE RATE WITH PRICE LEVELS: WHAT HAPPENS IN INTERNATIONAL MARKETS?. European Scientific Journal, ESJ, 9(31). https://doi.org/10.19044/esj.2013.v9n31p%p