In the presence of rigid prices, movements in the exchange rate help to absorb external shocks and to reduce changes in net exports. However, they also affect firms’ competitiveness, marginal costs, and labor demand. In countries where labor market institutions hinder wage adjustment (for...

This paper investigated empirically the relationship between monetary policy and exchange rate volatility in Pakistan along time span from 1971 to 2014. The outcome of unrestricted VAR explained as “there is weak linkage among exchange rate volatility and lag period monetary policy instruments...