Factors Affecting the Demand Side of Exports: Pakistan Evidence

Abstract

The aim of this article is to investigate different factors affecting the demand of Pakistani exports. Factors affecting the demand of exports include real effective exchange rate, nominal exchange rate, world production capability and world export price variable. The period of the study is from 1990 to 2010. Data is gathered from various sources including State Bank of Pakistan, Karachi Stock Exchange, Handbook of statistics on Pakistan Economy, Economic Survey of Pakistan and International Financial Statistics (IFS). Two Stage Least Square (2-SLS) Method was applied in the study.  Results show that, export demand decreases with increase in Real Effective Exchange Rate. Insignificant relationship was found between the demand of Pakistani exports and export price variable and nominal exchange rate. The study also found positive and significant association between the demand of Pakistani export and World Income.

Keywords: Export Growth, Foreign Direct Investment, Two Stage Least Square

JEL Classifications: F13, F14, O1