Impact of Foreign Capital Inflows and Money Supply on Exchange Rate: A Case Study of Pakistan
DOI:
https://doi.org/10.26710/reads.v3i1.167Keywords:
Exchange Rate; Workers’ Remittances; Money Supply; Foreign AidAbstract
The study attempts to examine the impact of foreign capital inflows and
money supply on exchange rate of Pakistan. For this purpose we have
undertaken time series data for the period of 1973-2016. Annual data for
the period 1973-2016 is used, taken from Economic Survey of Pakistan
(various issues) and International Financial Statistics (IFS). The main
variables used in our analysis are exchange rate, openness, workers’
remittances, foreign direct investment, foreign aid and money supply.
Simple Linear Regression model with ordinary least method (OLS) is
used to analyse the results. Money supply is positively and significantly
related to exchange rate. Worker’s remittances (WREM), foreign aid
(FAID), foreign direct investment. (FDI) and openness (OPP) are
negatively and significantly related to exchange rate. The study shows
that foreign capital inflows and workers’ remittances significantly
appreciate the exchange rate in the case of Pakistan.
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