Open AccessImpact of Exchange Rate Volatility on Unemployment in Pakistan
Author(s) -
Atiq Ur Rahman,
Salyha Zulfiqar Ali Shah,
Qamar uz Zaman
Publication year - 2021
Publication title -
global economics review
Language(s) - English
Resource type - Journals
eISSN - 2707-0093
pISSN - 2521-2974
DOI - 10.31703/ger.2021(vi-ii).05
Subject(s) - unemployment , economics , volatility (finance) , unemployment rate , short run , autoregressive model , full employment , labour economics , econometrics , macroeconomics
Unemployment is an alarming issue for bothdeveloped and developing countries, which sometimesvaries from region to region as well. Unemployment accompaniedwith Exchange Rate Volatility (ERV, hereafter) worsens thesituation. This paper tries to explore the relationship between ERVand unemployment and other selected factors in the case ofPakistan from 1980 to 2018. After necessary simulation, the studysupported the analyses through the autoregressive distributed lagmodel. Where, long-run coefficient reveals that ERV and exportsboth are positively affecting unemployment; whereas, import isinversely related to unemployment. Alternatively, export and GDPare inversely affecting unemployment in the short run; further,stability tests also support the relationship between the selectedvariables to achieve the long-run equilibrium. The study furthersuggests that the Government of Pakistan need to stabilizeexchange rate to control unemployment, which is 8 percent in thelong-run and 11 percent in the short run.