Global Advanced Research Journal of Management and Business Studies (ISSN: 2315-5086) December 2015 Vol. 4(11), pp 413-421

Copyright © 2015 Global Advanced Research Journals   

Original Research Articles

The Impact of Globalization on Real Exchange Rate in Pakistan (1980-2014)

Dr Sher Ali1, Dr Abdur Rauf, Amjad Ali

¹Assistant Professor and Ph.D., Department of Economics, Islamia College University Peshawar,

²Lecturer at IM/Sciences ,

³PhD scholar in University of Peshawar, KPK, PAKISTAN.

Contact : E-mail: ali_820423@yahoo.com  Cell # 0092-314-9629499.

Accepted 19 September 2015

Abstract 

This research paper empirically investigated the impact of Globalization on real exchange rate (PKR/$) in Pakistan, using annual time series data for the period of 1980 to 2010. Two measures are used for economic globalization: trade openness and financial integration. This study reveals a significant positive impact of globalization on real exchange rate. The result of Real Exchange Rate model indicates that Globalization measures leads to increase real exchange rate (PAK/US). The increase in real exchange rate means, the depreciation in real exchange rate (Pak rupee depreciated against US Dollar). The impact of financial integration is more impressive both in term of the coefficient and significance level. The impact of Globalization’s measure is insignificant in short run. The impact of controlled variable TOT is positive and significant in both the short and long run. Government consumption has no significant contribution to real exchange rate determination in both short and long run. This study provides empirical evidence that the process of globalization is one of the factors that affect real exchange rate. Real exchange rate plays an important role in the achievement of sustainable economic growth, employment generation, investment decision and consumption pattern of the country. Thus proper attention should be given to the determinants of real exchange rate and exchange rate policies in order to stabilize the country. 

Keywords: Globalization, Real Exchange rate, ARDL, Pakistan.