Abstract
The paper re-examines the determinants of the real exchange
rate equation, and suggests alternative determinants where appropriate,
as well as improvements in proxies from those conventionally used. The
paper emphasises the weaknesses of the multicountry approach to
empirical study of the real exchange rate. While real exchange rates are
determined for Pakistan, the terms-of-trade variable is found to be
insignificant. Excess demand for domestic credit, capital flow, and the
"opinions" variable are all found to be inversely related to the RER.
Thus government expenditure on non-tradable is positively related; and
better specification of the technological change variable shows support
for the balance effect.
Publisher
Pakistan Institute of Development Economics (PIDE)
Subject
Development,Geography, Planning and Development
Cited by
4 articles.
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