Mapping the Causal Connections among Exchange Rate Fluctuations and Agriculture Production: New Evidence from Pakistan Utilizing Cointegration Analysis

Abstract

This study is the foreign exchange rate and export sector and impact on macroeconomics variables. The objective is to research the experiential association between the rate of exchange and the export sectors of Pakistan. The time series data has been used which covered 1980- 2020. In this study, we used three major sectors that have been selected for this research like the Agricultural sector as the dependent variable. Rate of exchange, foreign direct investment, rate of inflation, and interest rate are being used as explanatory variables in this study. For the long run and short run estimation among variables; we used the Auto regressive distributed lag model (ARDL). Likewise, Augmented Dickey Fuller (ADF) uses the estimation of the integration of order. According to long run findings of this study illustrated that model one, exchange rate is positive and significant. Foreign direct investment is both positive and significant, as is the money supply (M2). Trade openness is a positive and significant impact on agriculture.