The Implication of the Oscillations in Exchange Rate for the Commodity-wise Trade Flows between Pakistan and China: An Evidence from ARDL Approach

This study intends to explore the impact of oscillations in the exchange rate on commodity-wise trade flows between Pakistan and its major trading partner China, while employing the annual data for 1982-2017. Applying the ARDL bounds testing approach, this study confirms that 94% of the selected exporting and 86% of the chosen importing industries possess cointegration. Further, the findings reveal that 81%, in the short run, and 52%, in the long run, of exporting industries respond to the volatile exchange rate. Moreover, the volatility affects 77%, in the short run, while 65%, in the long term, of the importing industries. Fascinatingly, the findings also indicate that a major shareholder exporting industry coded as 651 (Textile yarn and thread with 57% share) gets benefitted from the volatile exchange rate.