Examining the effects of real exchange rate on trade balance in pakistan

This study examines the impact of real exchange rate on trade balance between Pakistan and its major trading partners. Earlier empirical data offered mixed benefits from the impression regarding genuine swap prices in business account balances. In this study, we considered the data related to the variables for the period 2003-2013 and use Panel Data Regression Model for investigating the relationship between real exchange rate and trade balance. The results show that coefficient of real exchange rate is insignificant on the trade balance in case of Pakistan. Pakistan’s trade deficits are the deficits incurred with its major trading partners. We can say the imports are more than from export of Pakistan with its major trading partners that way the trade deficit incurred with its major trading partners. There in need to make strong trade policy this eliminates trade deficit from Pakistan. Furthermore, the facts from this study indicate that foreign real income is significant determinant of Pakistan’s trade balance.