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Research Article
 

Relationship between Exchange Rate and Budgetary Deficit-Empirical Evidence from Pakistan



Rana Ejaz Ali Khan , Ali Abbas Akhtar and Amir Saeed Rana
 
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ABSTRACT

The present study is concerned with the direct relation between exchange rate and budget deficit under the managed floating exchange system. The study is based on the data for 1982-1998 form Pakistan. It is estimated that budget deficit has both direct and indirect effects on the real exchange rate so a relationship between budget deficit and real exchange rate exist. The exchange rate changes depend on whether the fiscal deficit is reduced by increasing taxes or by lowering Government expenditures. The devaluation will be smaller if the cut in Government expedition falls on traded rather than non-traded goods.

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  How to cite this article:

Rana Ejaz Ali Khan , Ali Abbas Akhtar and Amir Saeed Rana , 2002. Relationship between Exchange Rate and Budgetary Deficit-Empirical Evidence from Pakistan. Journal of Applied Sciences, 2: 839-842.

DOI: 10.3923/jas.2002.839.842

URL: https://scialert.net/abstract/?doi=jas.2002.839.842

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