Impact of external debt and exchange rate volatility on domestic consumption. New evidence from Pakistan
This study has examined the impact of external debt and the volatility of exchange rate on domestic consumption in Pakistan by using the yearly data (1980–2014). We apply the bounds testing approach to cointegration and error-correction modeling to check their short run and long-run impact on the do...
| Main Authors: | , , , |
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| Format: | Article |
| Language: | English |
| Published: |
Taylor & Francis Group
2019-01-01
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| Series: | Cogent Economics & Finance |
| Subjects: | |
| Online Access: | http://dx.doi.org/10.1080/23322039.2019.1568656 |
| _version_ | 1819297103481929728 |
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| author | Ameet Kumar Niaz Ahmed Bhutto Khalid Ahmed Mangrio Muhammad Ramzan Kalhoro |
| author_facet | Ameet Kumar Niaz Ahmed Bhutto Khalid Ahmed Mangrio Muhammad Ramzan Kalhoro |
| author_sort | Ameet Kumar |
| collection | DOAJ |
| description | This study has examined the impact of external debt and the volatility of exchange rate on domestic consumption in Pakistan by using the yearly data (1980–2014). We apply the bounds testing approach to cointegration and error-correction modeling to check their short run and long-run impact on the domestic consumption. The findings of this study has contributed to the existing literature in two ways: bound test results show that income, interest rate, exchange rate, volatility of exchange rate, and external debt have long-term relationship with domestic consumption and income, interest rate and exchange rate have positive impact whereas exchange rate volatility and external debt have negative impact on domestic consumption in the short run as well as in long run. Moreover, the coefficient of ECMt-1 is significantly negative and it shows that adjustment toward equilibrium from short run to long run takes more than half a year. Consumption is the major component of GDP so policymakers use its determinants to fine-tune the economy. This study proposes that policymakers should consider external debt and exchange rate volatility in devising the monetary policy of Pakistan. |
| first_indexed | 2024-12-24T05:08:41Z |
| format | Article |
| id | doaj.art-75b54744c43742bd8792d28ae37e658e |
| institution | Directory Open Access Journal |
| issn | 2332-2039 |
| language | English |
| last_indexed | 2024-12-24T05:08:41Z |
| publishDate | 2019-01-01 |
| publisher | Taylor & Francis Group |
| record_format | Article |
| series | Cogent Economics & Finance |
| spelling | doaj.art-75b54744c43742bd8792d28ae37e658e2022-12-21T17:13:46ZengTaylor & Francis GroupCogent Economics & Finance2332-20392019-01-017110.1080/23322039.2019.15686561568656Impact of external debt and exchange rate volatility on domestic consumption. New evidence from PakistanAmeet Kumar0Niaz Ahmed Bhutto1Khalid Ahmed Mangrio2Muhammad Ramzan Kalhoro3Sukkur IBA UniversitySukkur IBA UniversitySukkur IBA UniversitySukkur IBA UniversityThis study has examined the impact of external debt and the volatility of exchange rate on domestic consumption in Pakistan by using the yearly data (1980–2014). We apply the bounds testing approach to cointegration and error-correction modeling to check their short run and long-run impact on the domestic consumption. The findings of this study has contributed to the existing literature in two ways: bound test results show that income, interest rate, exchange rate, volatility of exchange rate, and external debt have long-term relationship with domestic consumption and income, interest rate and exchange rate have positive impact whereas exchange rate volatility and external debt have negative impact on domestic consumption in the short run as well as in long run. Moreover, the coefficient of ECMt-1 is significantly negative and it shows that adjustment toward equilibrium from short run to long run takes more than half a year. Consumption is the major component of GDP so policymakers use its determinants to fine-tune the economy. This study proposes that policymakers should consider external debt and exchange rate volatility in devising the monetary policy of Pakistan.http://dx.doi.org/10.1080/23322039.2019.1568656exchange rate volatilityexternal debtardl |
| spellingShingle | Ameet Kumar Niaz Ahmed Bhutto Khalid Ahmed Mangrio Muhammad Ramzan Kalhoro Impact of external debt and exchange rate volatility on domestic consumption. New evidence from Pakistan Cogent Economics & Finance exchange rate volatility external debt ardl |
| title | Impact of external debt and exchange rate volatility on domestic consumption. New evidence from Pakistan |
| title_full | Impact of external debt and exchange rate volatility on domestic consumption. New evidence from Pakistan |
| title_fullStr | Impact of external debt and exchange rate volatility on domestic consumption. New evidence from Pakistan |
| title_full_unstemmed | Impact of external debt and exchange rate volatility on domestic consumption. New evidence from Pakistan |
| title_short | Impact of external debt and exchange rate volatility on domestic consumption. New evidence from Pakistan |
| title_sort | impact of external debt and exchange rate volatility on domestic consumption new evidence from pakistan |
| topic | exchange rate volatility external debt ardl |
| url | http://dx.doi.org/10.1080/23322039.2019.1568656 |
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