An empirical inquisition of the impact of exchange rate and economic growth on export performance of Pakistan

The role of international trade in economic development is very important. International trade is a potential source to increase the world production of goods and services. All the trading nations get benefits of increased world production caused by international trade. The present study empirically analyzed the impact of exchange rate and economic growth along with some other important macroeconomic factors on exports performance of Pakistan by using time series data. The study applied the Augmented Dickey-Fuller (ADF) Unit Roots Test to check the stationarity of data series. Autoregressive distributed lag model is used to estimate the long run relationship among the variables, followed by Unrestricted Error Correction Model (UECM). Empirical results based on ARDL bound testing approach to co-integration show that there exist a long run equilibrium relationship between Pakistan exports performance and its factors. In this study; Exchange rate, gross domestic production and trade openness have positive and significant impact on export performance, whereas role of foreign direct investment in determination of exports performance of Pakistan seems to be insignificant according to our analysis. In the end, the estimates of labor force indicate the higher growth of labor force along with lack of skills leads to contribute adversely on export oriented sectors where skilled labor force is required.