BS ECONOMICS

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Browsing BS ECONOMICS by Author "Hassan Mehmood"

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    Nexus of Oil Prices and Exchange Rate: A Case Study of Pakistan
    (UMT, Lahore, 2021) Hassan Mehmood
    This study's main purpose is to examine the significance of the relationship between exchange rate and oil prices in the long-run and short-run for the case of Pakistan. for this 5 purpose, the exchange rate was taken as a dependent variable, and oil prices were taken as an independent variable with other controlled variables including export, remittances, total reserves, and industrial growth. The data used for estimation is collected from the World Development Indicator and the Organization of Petroleum Exporting Countries. 42 observations have been taken to analyse the nexus of oil prices and exchange rate from 1978 to 2019. The estimations have declared that the nexus between the oil prices and the exchange rate is significant and positive. Increases in the exchange rate will increase the oil prices or increases in oil prices increases the exchange rate, if we want a stable exchange rate or prevent it from increases, then the oil prices must be controlled. Moreover, industrial growth has a positive and significant relationship with the exchange rate in both the long-run and short-run. Furthermore, export has negative and insignificant relation with exchange rate in the short-run in the long-run export have a negative and significant relationship with the exchange rate. Lastly, remittances and total reserves have a positive and significant relationship with the exchange rate in the long-run, in the short-run remittances and total reserves have a positive but insignificant relationship with the exchange rate. In the long-run higher reserves will bring confidence in the market in the time of financial instability with the help of reserves exchange rate can be controlled. Whereas an increase in remittances will increase the economy’s income and the nominal exchange rate is appreciated with the inflow of remittances.