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Factor causing devaluation of Pakistani currency

Introduction It can be said that the economic stability of a nation depends on how well the country are able to sustain their competencies through different factors. The stability can be seen in terms of the GDP growth of the nations as well as the numbers of employed citizen or individuals within the nation and this can also be seen on how their currency is playing in the global market. There are many theorists that attempt to know the factors that cause the devaluation of countrys currency. In recent years, most economists began to pay more focus on factors that cause the devaluation of Pakistani currency. Primarily, the main goal of this study is to conduct an empirical analysis of the factors that causes the devaluation of the Pakistani currency.

Background of the Study The monetary policy is defined as the economic terms pertaining to government actions related to the setting of public expenditure and how these expenditures will be supported. Governments utilize the policy in influencing the aggregate demand level; the purpose of which is to fulfill economic objectives including economic growth, full employment and price stability. There are a number of policy types. One of which is the contractionary monetary policy, which is characterized by reduced public spending or increased taxation. This type is also known as tight monetary policy. The main purpose of implementing this type of policy is to increase the interest rates. This in turn will help in controlling inflation, increasing the exchange rate as well as attracting foreign currencies. Such policy however, also has some drawbacks. In particular, this could reduce the money level in the economy for consumption, resulting to decreased demand and spending as well as increased pressure on prices. Governments implement such policies in order to sustain the local currency and their countries financial state. In Pakistan, its president has chosen to implement the tight monetary policy so as to defend the real. In this discussion, the different aspects of Pakistans previous and present financial status are described. The reactions of various economic aspects to the local administrations decision to implement this type of policy are also explained using facts and theories. Finally, recommendations or the probable courses of action the government could take to resolve its financial issues are provided.

Research Objectives

As mentioned, the goal of this paper is to conduct empirical analysis on the factors that cause the devaluation of Pakistani currency, specifically this paper aims on achieving the following objectives: 1. 2. Analysis of the economic status of Pakistan, Identification of the factors that affects the currency of Pakistan

3. Establishing an evidence of the significant relationship between Pakistans currency and its economic performance.

Research Questions Several related studies and researches conducted in the past have shown the relationship between economic performance and the countrys currency. Some studies claim that there is a positive correlation between these two variables; others researches however, were not able to determine any significant correlation. The clear confirmation of the relation between currency and economic performance will be advantageous to countries worldwide, particularly in enhancing their wealth status and productivity levels. As varied results were gathered from previous studies in relation to this problem, this study will help identify the distinct relation between the variables through correlation studies using Pakistan. This proposes study aims on answering the following queries: 1. 2. 3. What is the current value of the currency of Pakistan? What are the factors that devaluates the currency of Pakistan How these factors are can be avoided to prevent currency devaluation.

Research Design For this study, the descriptive and empirical research method will be utilized. The purpose of employing this method was to describe the nature of a situation, as it exists at the time of the study and to explore the cause or causes of a particular condition. The researcher opted to use this kind of research considering the desire to obtain first hand data from the respondents so as to formulate rational and sound conclusions and recommendations for the study. Since this study was focused on the relation between gross domestic product and unemployment rate, the descriptive method is the most appropriate method to use.

More specifically, this study will make use of correlation studies as a research method. This method is designed to determine the extent to which different variables are related to each other in the population of interest. This method will facilitate the assessment of how much variation is caused by factors that devaluates currency of Pakistan. This method will also help the researcher test the hypotheses stated in the study. The correlation method is advantageous as it does not require a large sample. This is because it is assumed that if a relationship exists, it will be evident in a sample of modest size. However, the provided sample should represent the population being investigated. Moreover, the instrument to be used should also be reliable and valid. Thus, correlation study is highly dependent on the skills of the researcher in selecting and developing research instruments.