Impact of Exchange Rate, Inflation Rate and Interest Rate on Balance of Payment: A Study from India and Pakistan
Khuram Shafi, School of Management, HuaZhong University of Science and Technology, Wuhan, China.
Liu Hua, Professors, School of Management, HuaZhong University of Science and Technology, Wuhan, China.
Zahra Idrees, School of Management, HuaZhong University of Science and Technology, Wuhan, China.
Amna Nazeer, Schools of Statistics and Mathematics, HuaZhong University of Science and Technology, Wuhan, China.
Exchange rate is a significant factor in international macroeconomics; it affects are witnessed in the recent past on different currency crises in many economies and has attracted focus of policy makers around the globe. Exchange rate has proved its behavior in determining the country economic position in this age of globalization and trade liberalization. This is a comparative study of balance of Payment (BOP) of two countries: Pakistan and India. Literature shows that BOP should be stable it should not be in deficit and in surplus because in both conditions it is unfavorable. So this research study investigates the fluctuation in three significant rates of any economy i.e. inflation rate, interest rate and foreign exchange rate on BOP. Results showed that inflation and foreign exchange rate has positive effect wile interest rate have negative effect on BOP in both countries.
Exchange Rate, Interest Rate, Inflation Rate, Balance of Payments
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