Abstract:
This study examines how the FDI, exchange rate and inflation impact the balance of trade. The
principal dimensions of balance of trade that impacts the economy most are examined. The
attention of this study is to predict the possibility, at an acceptable level of confidence that
controlled FDI, lower exchange rate and less inflation have positive association with the balance
of trade. Using time series data from 1982-2012 taken from the economic survey of Pakistan,
the results were analyzed using the regression analysis technique through E-Views software. It
is found that, as hypothesized, controlled FDI, lower exchange rate and less inflation impacts
positively with balance of trade. Hence, the hypotheses of this study which supports the
literature and show positive relations among the dependent and independent variable are
sustained. Afterwards, the implications of this inquiry for the academia, practitioners, and the
policy makers are discussed in the field of economics. The study offers a detailed insight to help
academicians, policy makers and practitioners to improve balance of trade issues within the
economy for favorable results. Finally, the possible avenues for future research in the existing
field of inquiry are discussed briefly.
