Impact of Exchange Rate, Inflation Rate and Interest Rate on Balance of Payment: A Study from India and Pakistan
[1]
Khuram Shafi, School of Management, HuaZhong University of Science and Technology, Wuhan, China.
[2]
Liu Hua, Professors, School of Management, HuaZhong University of Science and Technology, Wuhan, China.
[3]
Zahra Idrees, School of Management, HuaZhong University of Science and Technology, Wuhan, China.
[4]
Amna Nazeer, Schools of Statistics and Mathematics, HuaZhong University of Science and Technology, Wuhan, China.
Exchange rate is a significant factor in international macroeconomics; it affects are witnessed in the recent past on different currency crises in many economies and has attracted focus of policy makers around the globe. Exchange rate has proved its behavior in determining the country economic position in this age of globalization and trade liberalization. This is a comparative study of balance of Payment (BOP) of two countries: Pakistan and India. Literature shows that BOP should be stable it should not be in deficit and in surplus because in both conditions it is unfavorable. So this research study investigates the fluctuation in three significant rates of any economy i.e. inflation rate, interest rate and foreign exchange rate on BOP. Results showed that inflation and foreign exchange rate has positive effect wile interest rate have negative effect on BOP in both countries.
Exchange Rate, Interest Rate, Inflation Rate, Balance of Payments
[1]
Calvo, G. A. "Staggered prices in a utility-maximizing framework," Journal of monetary Economics, 12(3), 383-398 (1983)
[2]
De La Cruz Martínez, J. "Mexico’s balance of payments and exchange rates: a cointegration analysis," The North American Journal of Economics and Finance, 10(2), 401-421 (1999)
[3]
Atkinson, G., & Hamilton, K. "International trade and the ecological balances of payments," Resources Policy, 28(1), 27-37 (2002)
[4]
Thanh, N. N., & Kalirajan, K. "Can devaluation be effective in improving the balance of payments in Vietnam?" Journal of Policy Modeling, 28(4), 467-476 (2006)
[5]
Thacker, S. C. "The high politics of IMF lending," World Politics, 52(01), 38-75 (1999)
[6]
Choe, S. C. "The impacts of globalization on the urban spatial-economic system in Korea. In Globalization and Urban Development, 59-78 Springer Berlin Heidelberg (2005)
[7]
Hejazi, W., & Pauly, P. "Motivations for FDI and domestic capital formation" Journal of International Business Studies, 34(3), 282-289 (2003)
[8]
Habib, M., & Zurawicki, L. "Corruption and foreign direct investment." Journal of international business studies, 291-307 (2002)
[9]
Weller, C. E., & Scher, M. "Multinational bank credit in less industrialized economies" Journal of International Business Studies, 32(4), 833-851 (2001)
[10]
Globerman, S., & Shapiro, D. "Governance infrastructure and US foreign direct investment," Journal of International Business Studies, 34(1), 19-39 (2003)
[11]
Jha, R. "Downward rigidity of Indian interest rates," Economic and Political Weekly, 469-474 (2002)
[12]
Schnitzer, M. "Debt v. foreign direct investment: the impact of sovereign risk on the structure of international capital flows," Economica, 69(273), 41-67 (2002)
[13]
Eichengreen, B., Rhee, Y., & Tong, H. "China and the exports of other Asian countries," Review of World Economics, 143(2), 201-226 (2007)
[14]
Acharyya, R. "Exchange Rate Policy and Black Market Premium on Foreign Exchange: Theory and Evidence.," Economic and Political Weekly, (2001)
[15]
Nagaishi, M. "Stock market development and economic growth: dubious relationship," Economic and Political Weekly, (2004-2012 )
[16]
Raipuria, K. "Foreign Trade Eludes Economic Crystal Ball Gazers," .Economic and Political Weekly, 2308-2317 (1998)
[17]
Lopez, J. H., Schmidt-Hebbel, K., & Servén, L. "How effective is fiscal policy in raising national saving?" Review of Economics and Statistics, 82(2), 226-238 (2000)
