Trade Dynamics and Currency Fluctuations: Assessing the Impact of Exports, Imports, and Exchange Rate Volatility on Pakistan’s GDP Growth

Sameer Ahmed Siddiqui; Dr. Muhammad Muzammil

doi:10.63544/jbii.v5i6.92

Authors

Sameer Ahmed Siddiqui Research Scholar, Karachi University Business School, University of Karachi, Pakistan
Dr. Muhammad Muzammil Assistant Professor, Karachi University Business School, University of Karachi, PakistanAssistant Professor, Karachi University Business School, University of Karachi, Pakistan

DOI:

https://doi.org/10.63544/jbii.v5i6.92

Keywords:

GDP Growth, Exports, Imports, Exchange Rate Volatility, Cointegration, VECM, Pakistan, Trade Dynamics

Abstract

This study examines the dynamic interrelationship between trade performance, exchange rate volatility, and economic growth in Pakistan from 1980 to 2022. Economic growth, measured by Gross Domestic Product (GDP), remains a critical policy priority for developing economies, particularly for Pakistan, which faces persistent macroeconomic instability, widening trade deficits, and pronounced currency fluctuations. The external sector, encompassing exports, imports, and exchange rate dynamics, significantly influences national economic outcomes, yet existing literature offers limited integrated empirical analysis of these variables. To address this gap, the study employs a quantitative time-series framework using secondary annual data from the State Bank of Pakistan, Pakistan Bureau of Statistics, and World Development Indicators. Methodologically, the research applies unit root tests, Johansen cointegration, Vector Error Correction Modelling (VECM), and Granger causality tests to explore both short-run and long-run linkages among the variables. By explicitly incorporating exchange rate volatility alongside trade flows, the analysis provides a more comprehensive understanding of how external sector instability shapes macroeconomic performance. The findings are expected to yield actionable policy recommendations for enhancing export diversification, improving import management, stabilizing exchange rates, and fostering sustainable economic growth in Pakistan.

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