Authors: Asma Fiaz, Shahid Waseem Malik, Nabila Khurshid, and Ahsan ul Haq Satti
Year: 2021, Volume 21 Number 2
Pages: 171 – 183
In the literature for Pakistan, the asymmetric effect of the exchange rate on the agricultural sector stands ignored. Current research is designed to investigate the possible asymmetric effect of exchange rate fluctuations on the agricultural sector using a nonlinear autoregressive distributed lag (NARDL) framework. The data set comprises a period of 1970 to 2019, which is taken from the Ministry of Finances and handbook of the State Bank of Pakistan. The variables used in the study are real effective exchange rate, agricultural production, inflation, primary export, government investment, terms of trade, imports, and exports. The ADF unit root test confirmed that the research series is a combination of stationary and non-stationary variables. The study, therefore, uses the ARDL approach, but the focus is to investigate the asymmetric effect; thus, the NARDL technique is also applied. The NARDL results suggest that positive movements have lesser impacts than those of negative movements in the exchange rate on the agriculture sector both in short run and in the long run.
Keywords: asymmetry, agricultural sector, exchange rate fluctuation, Pakistan