Reasons of currency devaluation in Pakistan for different political regimes

Abstract

The main motive of this project is to analyze that how the currency devaluation of Pakistan is being affected by analyzing different economic variables. There are many other variables that have the impact on currency devaluation i.e. external debt, terrorism, monetary policy and political instability etc. as they appear relevant. In this report theses macroeconomic variables have a strong significance because these are used to describe the valuation of the currency of the respective country. The devaluation of currency in Pakistan is one of the major problems that Pakistan is facing from the long time. This main problem of currency devaluation was started from 2006-2007 when the US dollar start moving upward in the graphs and in results the value of Pakistani currency gets weaker. This report will help to analysis the valuation of currency in different regimes by using different economic variables. The results of the first regimes are that the relation between the exports and worker’s remittances shows the positive relation. Whereas imports, Foreign exchange reserves, Foreign Direct investment and inflation has a negative relation with exchange rate. Moreover, in second regime the results show that the relation between exports, imports, Foreign Direct reserves, Workers remittance, have the positive relationship with the exchange rate, whereas inflation has the negative relation with the exchange rate