Impact of Exchange Rate on Imports and Exports
Impact of exchange rate on Imports and Exports of Pakistan. (2005-2010)
Abdullah Hashmi (18016)
Wednesday 9-12
Table of Contents 1. Introduction: 3 1.1What is exchange rate? 3 1.2 Floating exchange rate function. 3 1.3 How exchange rate effect imports and exports? 3 3. Methodology: 5 4. Data Collection: 6 5. Data Analysis: 8 6. Research Findings: 8 7. References: 9
1. Introduction:
1.1What is exchange rate?
Exchange rate is the currency rate between two countries that is the price of one country currency is expressed in terms of another countries currency. For instance the rate of USD against PKR is, $1=97.7PKR. We have expressed exchange rate against USD because it is globally used for international transactions. The major types of exchange rate are; 1. Fixed/pegged exchange rate; 2. Flexible/floating exchange rate.
In a fixed exchange rate system there is government intervention in the currency market so that the exchange rate stays near to an exchange rate target. In it, the rate of exchange of currency is fixed in terms of gold or another currency. For example GCC (Gulf Cooperation Council) have agreed to establish a monetary union by 2010 with a single currency pegged to the U.S. dollar.
1.2 Floating exchange rate function.
In Pakistan floating exchange rate is used for the international transactions. In it, the government does not actively intervene in the currency markets to achieve a desired exchange rate level. In a country where floating exchange rate is followed the exchange rate market is determined by the demand and supply for a particular currency relative to the other currency. Therefore there are fluctuations on the exchange rate and it moves freely according to the demand and supply of that particular currency. Refer figure 3.
1.3 How exchange rate effect imports and exports?
As discussed earlier exchange rate is the value of one currency in terms of other currency, payments and receipts are
Abdullah Hashmi (18016)
Wednesday 9-12
Table of Contents 1. Introduction: 3 1.1What is exchange rate? 3 1.2 Floating exchange rate function. 3 1.3 How exchange rate effect imports and exports? 3 3. Methodology: 5 4. Data Collection: 6 5. Data Analysis: 8 6. Research Findings: 8 7. References: 9
1. Introduction:
1.1What is exchange rate?
Exchange rate is the currency rate between two countries that is the price of one country currency is expressed in terms of another countries currency. For instance the rate of USD against PKR is, $1=97.7PKR. We have expressed exchange rate against USD because it is globally used for international transactions. The major types of exchange rate are; 1. Fixed/pegged exchange rate; 2. Flexible/floating exchange rate.
In a fixed exchange rate system there is government intervention in the currency market so that the exchange rate stays near to an exchange rate target. In it, the rate of exchange of currency is fixed in terms of gold or another currency. For example GCC (Gulf Cooperation Council) have agreed to establish a monetary union by 2010 with a single currency pegged to the U.S. dollar.
1.2 Floating exchange rate function.
In Pakistan floating exchange rate is used for the international transactions. In it, the government does not actively intervene in the currency markets to achieve a desired exchange rate level. In a country where floating exchange rate is followed the exchange rate market is determined by the demand and supply for a particular currency relative to the other currency. Therefore there are fluctuations on the exchange rate and it moves freely according to the demand and supply of that particular currency. Refer figure 3.
1.3 How exchange rate effect imports and exports?
As discussed earlier exchange rate is the value of one currency in terms of other currency, payments and receipts are
References: http://www.imf.org/external/pubs/ft/med/2003/eng/jbili/jbili.htm http://mpra.ub.uni-muenchen.de/11624/1/MPRA_paper_11624.pdf www.sbp.org.pk/ecodata/HER-USDollar.xls www.pbs.gov.pk/sites/default/files/external_trade/14.8.pdf http://www.tutor2u.net/economics/revision-notes/as-macro-exchange-rates.html