AN Effect of trade shortfall, External obligation on exchange rate, a case study on Pakistan

Abstract

Current economic conditions in developing countries are very problematic, particularly devaluations in a currency that leads to an increase in the Exchange rate(ER), Moreover, change in exchange rate with less export and more imports developing countries have faced the problem of trade deficit(TD) at same time deficit balance of payment(DBOP), due to deficit balance of payment developing country has unable to pay external debts(EDs) which leads to again increase in ER this cycle generates several problems So, researchers 1^st core objective is to ascertain the impact of  TD on  EDs and 2^nd core objective is to ascertain the impact of  EDs on ER. Several literature and theories highlighted the relationship between these IVs and DV. Researchers used preceding 15 years’ secondary data related to Pakistan. 15 years of data consist of three different governments and different policymakers. For analysis, scholars used correlation and OLS techniques with the help of Ms excel and E-views to check whether the result are the same or not with other researchers. The finding of this study shows that all three alternative hypotheses are accepted and have a significant impact.