An empirical study on the Factors affecting Foreign exchange markets of Pakistan

Abstract

This study explores the dimensions at which foreign exchange markets of Pakistan are under influence of some internal factors i.e Discount rate and interest rate and how it really effects the Forexchange markets of Pakistan. The study also explores the effect of discount rate and interest rate effects on five major currencies for which the data is collected from state bank of Pakistan, economic survey of Pakistan and business recorder, HEC Digital Library, Articles from different Journals, Annual reports of SBP and KSE, International Financial Statistical Yearbook, BOP & BOT Statistical year book. After analyzing the data the study showedthe overall positive impact of the discount rate and interest rate on the foreign exchange of Pakistan which included five major currencies i.e. USD, GBP, JPY, CAD and EURO. We used correlation and regression analysis to test our hypothesis which says that discount rate and interest rate has positive impact on the foreign exchange market of Pakistan.

Keywords: Stock Exchage, Interest Rate, Pakistan Foreign Exchange, Discount rate, Foreign Exchange