Understanding the Dynamics: The Impact of Exchange Rate Fluctuations on Pakistan's Economic Landscape

Abstract

The dynamics of exchange rates play a pivotal role in shaping the economic landscape of nations, influencing key indicators such as trade balances, foreign direct investment, and overall economic performance. This research delves into the specific case of Pakistan, aiming to comprehensively analyze the impact of exchange rate fluctuations on the country's economic framework. The objective of this study is to focus on evaluating the relationship between exchange rate fluctuations and crucial economic indicators, including GDP growth, inflation rates, FDI, CPI, and trade balances. Additionally, we examine the influence of currency volatility on export and import competitiveness, shedding light on the implications for Pakistan's trade dynamics. Methodologically, this study employs a rigorous analysis of historical exchange rate movements in Pakistan, identifying trends and pivotal events that have shaped the country's currency valuations by using correlation, regression and others. Lastly, this study provides insightful recommendations for policymakers to navigate challenges and capitalize on opportunities in shaping Pakistan's economic policies.