Export Price Competitiveness in the Manufacturing Sector of Pakistan
Author: Uzma Zia

Competitiveness assessments are a vital component in evaluating a country’s macroeconomic performance and sustainability of its policies. It is generally believed that exchange rate depreciation would stimulate exports and curtail imports, while exchange rate appreciation would be harmful for exports and encourage imports. In this research this prediction has been assessed by considering the existence of import content in the production of exportables and productivity gains. Export price competitiveness method is the main focus of this research. At times favorable factors may not give rise to increased sales in foreign markets. Exchange rate movements affect exports through: its depreciation and variability (risk). Depreciation raises exports but the associated exchange rate risk could offset export gains. Therefore the effect of two factors is important to study simultaneously. It is argued that exchange rate risk depresses international trade. Greater exchange rate risk increases the riskiness of trade profits and the risk averse traders reduce trade. Exchange rate risk could lower exports due to profit risk but in some cases it may be possible to get positive effects of conditional variance on exports also. Results of this study show that exchange rate depreciation raises export-price which indicate improvement in export competitiveness. On the other hand, exchange rate volatility erodes export competitiveness. In the manufacturing sector of Pakistan, given the exchange rate depreciation, the exchange rate volatility shows that the risk effect is dominating the depreciation effect. In case of Pakistan depreciation increases exports (traditional view) but the domination of exchange rate risk leads to a decrease in export competitiveness. Supervisor:- Dr. Zafar Mahmood

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Keywords : Export Price, Manufacturing Sector, Manufacturing Sector-Pakistan
Supervisor: Zafar Mahmood

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