What Determines the Behavior of Exchange Rate in Pakistan: Monetary Model Analysis?

Abstract

Main objective of our study is to determine the exchange rate through the monetary model and modify the monetary model by using the annual time series data from 1982-2009. The results show that dollarization plays an important role in the determination of exchange rate so we should focus on the modified monetary instead of simple model. Thus exchange rate policy has to be selected taking into account high degree of dollarization.