This study investigates the volatility of exchange rates and its relationship with selected macroeconomic variables; foreign direct investment, gross domestic product, and inflation. Secondary time-series data is used and collected from world development indicators for the time period of 29 years (1991 to 2019) of Pakistan. Unit root test, co-integration test, GARCH, and regression analysis are the techniques used for hypothesis testing. In this study, the Unit root ADF test is used to check the stationarity of data then GARCH is applied to check exchange rate volatility, co-integration, and regression analysis are applied to check the relationship between dependent and independent variables. The underlying study concludes the results that there is an existence of long-term and persistent volatility in exchange rates, and the exchange rate has a positive relationship with the gross domestic product and foreign direct investments but a negative and insignificant relationship with Inflation. The findings suggest that the exchange rates should be managed by decision-makers to have a positive impact on the economy. Many studies suggest that fixed exchange rates should be adopted by developing countries instead of floating exchange rates. This study is helpful for policymakers and for researchers.
This work is licensed under a Creative Commons Attribution 4.0 International License.
Submission of work requires that the piece to be reviewed has not been previously published. Upon acceptance, the Author assigns to the Bulletin of Business and Economics (BBE) the right to publish and distribute the manuscript in part or in its entirety. The Author's name will always be included with the publication of the manuscript.
The Author has the following nonexclusive rights: (1) to use the manuscript in the Author's teaching activities; (2) to publish the manuscript, or permit its publication, as part of any book the Author may write; (3) to include the manuscript in the Author's own personal or departmental (but not institutional) database or on-line site; and (4) to license reprints of the manuscript to third persons for educational photocopying. The Author also agrees to properly credit the Bulletin of Business and Economics (BBE) as the original place of publication.
The Author hereby grants the Bulletin of Business and Economics (BBE) full and exclusive rights to the manuscript, all revisions, and the full copyright. Bulletin of Business and Economics (BBE) rights include but are not limited to the following:
(1) to reproduce, publish, sell, and distribute copies of the manuscript, selections of the manuscript, and translations and other derivative works based upon the manuscript, in print, audio-visual, electronic, or by any and all media now or hereafter known or devised; (2) to license reprints of the manuscript to third persons for educational photocopying; (3) to license others to create abstracts of the manuscript and to index the manuscript; (4) to license secondary publishers to reproduce the manuscript in print, microform, or any computer-readable form, including electronic on-line databases; and (5) to license the manuscript for document delivery. These exclusive rights run the full term of the copyright, and all renewals and extensions thereof.