Impact of exchange rate on Imports and Exports of Pakistan. (2005-2010)
Abdullah Hashmi (18016)
Wednesday 9-12
Table of Contents 1. Introduction: 3 1.1What is exchange rate? 3 1.2 Floating exchange rate function. 3 1.3 How exchange rate effect imports and exports? 3 3. Methodology: 5 4. Data Collection: 6 5. Data Analysis: 8 6. Research Findings: 8 7. References: 9
1. Introduction:
1.1What is exchange rate?
Exchange rate is the currency rate between two countries that is the price of one country currency is expressed in terms of another countries currency. For instance the rate of USD against PKR is, $1=97.7PKR. We have expressed exchange rate against USD because it is globally used for
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One explanation found for larger trade affect between US-China was composition of goods traded by each geographical area. One good which is less price elastic in china might be more price elastic in US, trade impacts of exchange rate changes in euro will be less. An example of this would be Euro-Area’s major export nuclear reactors which is gridding 30% of its exports value to China in 2008. In most cases, nuclear reactors are mastered by long-term contracts which account large financing projects which undoubtedly include exchange hedging mechanisms. Changes in exchange rate of this specific product will not significant impact on their exchange rate.
This study finds that exports are more sensitive than imports as regards to changes in exchange rate level. The effect of exchange rate level of agricultural products is greater than the manufacturing products. The reasons behind it might be greater homogeneity of agricultural products than the manufacturing goods, more easily allowing the opportunity to change suppliers and moreover, price transmission mechanisms maybe different in agriculture as compare to manufacturing. In many of the relationships evaluated in the study the basic factors have often been clashing and often conflicting effects. In the case of the agricultural sector, one particularity is that tariffs are often expressed as specific, as opposed to ad valorem rates. European Union and USA use an import tariff structure for agricultural
Hint : When there is a change in the exchange rate, this would automatically alter the prices of all foreign goods to domestic goods, as the domestic prices are intertwined with the foreign prices. Thus, these changes would affect the trade flows between nations.
An exchange rate is the price for which one currency is worth converted into another rate. The exchange rate is determined by the supply and demand conditions of relevant currencies in the market transaction of currency exchanges occur in the foreign exchange markets. For example, currently, the £1 is worth $1.67 which means that at this stage, the pound is stronger than the dollar. Businesses should ensure that they frequently check the exchange rates to see if any changes to their prices need to be made or if the exchange rate benefits them. If Iron Bru were to export a large amount of products to a country such as Germany or Poland, there will
The Exchange rate is the amount one country will buy another country’s currency. The conversion of currency is not 1 dollar for 1 dollar. The exchange rate between Australia and America is $0.7676 for 1 Australian dollar. Exchange rates can change from day to day. Back in 2011 the exchange rate between Australia and the USA was 1 Australian dollar would buy 1.015 US dollars. It was almost 1 for 1.
An exchange rate is the value of a currency compared another currency to find a ratio and a rate of exchange if one were to take place. According to X-Rates these some exchange rates with the United States dollar; 1 USD to .90 Euro, 1 USD to .70 British pound, 1 USD to 1.33 Canadian dollar, 1 USD to 113.77 Japanese Yen, and 1 USD to 6.5 Chinese
Exchange Rate: "The rate at which one unit of domestic currency is exchanged for a given amount of foreign currency"
“Exchange rate can be defined as the price of one currency expressed in terms of another currency” (Reserve Bank of Australia, 2014). Australia follows floating exchange rates, under this method the value of a country’s currency change frequently. The market rate will depend on the demand and
The interest rate is the amount charged above the amount loaned, saved or borrowed while exchange rate is the value of a currency compared to another currency.
“Exchange rate can be defined as the price of one currency expressed in terms of another currency” (Reserve Bank of Australia, 2014). Australia follows floating exchange rates, under this method
There would be no significant impact on any economies as long as exchange rates are flexible.
The exchange rates is a complicated concept that derives a relationship between the imports and exports. The exchange rate has also effect on the trade surplus and deficit. A weaker currency will make imports more expensive than the exports and a strong currency will make imports cheaper.
• Exchange rates. These play a large part in the value of net exports. A fall in a countries exchange rate will reduce the price of exports and raise the price of imports, thus exports should rise and imports fall - resulting in an increase in net exports. A rise in a countries exchange rate will raise the price of exports and make imports cheaper, therefore making exports fall and imports rise. The overall effect will be a fall in net exports.
Central bank of any country takes decision on which type of exchange rate to use in their country. When central bank takes decision that not to change value of their currency with respect to foreign currency then it is termed as fixed rate. Different variants are available in fixed rate as,
Measuring the magnitude of exchange rate pass-through for Chinese exports is all the more relevant because China’s trade imbalance with richer trading partners, notably the United States, is often perceived as exacerbated by exchange rate manipulations. Many indeed argue that an appreciation of the renminbi would help rebalance China’s trade. While the RMB was pegged to the U.S. dollar until July 2005, Tang and Zhang (2014) noted that there were significant fluctuations in real terms from an appreciation of 9% from 2000 to 2001 to a depreciation of 17% from early 2005. The extent of its trade’s response to a change in the exchange rate however depends on the magnitude of the ERPT and on the price elasticity of Chinese exports and imports.
In the world, every country has its own level of production and consumption of goods and services called the economy. The economic activities allow each country to have its currency valued against other currencies and this is called exchange rate. When you borrow money, there is a charge that you pay in return on top of the borrowed amount called interest. Interest is usually calculated as per annum and it influences exchange rates.
Exchange rate represents the external value of a currency. Changes in exchange rates may affect the relative position of a country in the international trade. Politicians and economists concern about exchange rate variability for lots of reasons, among which that the exchange rate variability discourages trade comes first. However, a large empirical literature on this issue does not confirm a significant effect of exchange rate on the volume of trade [1]. Instead other variables such as employment should be much more important from a practical point of view, for it is closely related to people’s livelihood.