Long run Determinants of Real Exchange Rate : An Econometric Analysis from Pakistan

Real Exchange rate is an important player in the growth of the economy as it may lead tohigher export by stabilizing currency value at any specific level. This study aims toanalyze the determinants of real exchange rate in Pakistan. Time series data is collectedfrom 1972 – 73 to 2012 – 13. Johansen co-integration test and error correction model isutilized for examining long run and short run elasticity’s. The study concludes that realexchange rate is depreciated by terms of trade and Price level. While trade restrictionsand workers’ remittances are exerting negative effect or appreciating real exchange rateof Pakistan in the long run