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THE EFFECTS OF DEVALUATION OF CURRENCY ON ECONOMIC GROWTH THE MEDIATING ROLE OF CURRENT ACCOUNT DEFICIT

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12 Pages : 145-156

http://dx.doi.org/10.31703/ger.2022(VII-I).12      10.31703/ger.2022(VII-I).12      Published : Mar 2022

The Effects of Devaluation of Currency on Economic Growth: The Mediating Role of Current Account Deficit

Abstract

    This study explores whether Pakistan's current account deficit-acted as a mediator in the linkage between the devaluation of the currency and the expansion of the economy from 1972 to 2016. All the variables have been shown to have a heterogeneous order of integration by using the Augmented Ducky Fuller (ADF), Phillips-Perron (PP), and Ng-Parron unit root tests. As shown in this article, the Auto regressive Distributive Lag Model (ARDL) is used to figure out how the variables are linked. The results clearly demonstrate that the current account balance fully mediates the relationship between devaluation of the currency and economic growth with a coefficient value of -0.12. Findings show that devaluation of the currency negatively affects the current account balance and economic growth. Moreover, through an indirect channel,the devaluation negatively affects the current account balance, which hampers economic growth.

    Devaluation, Economic Growth, Autoregressive Distributed Lag Model (ARDL)

    (1) Naveed Ali
    Lecturer in Economics, Department of Economics and Development Studies University of Swat, KP, Pakistan.
    (2) Abdul Wahab
    Lecturer in Economic, Government Poly technical institute, Sardar Garhi Peshawar, KP, Pakistan.
    (3) Khalid Khan
    Department of Economics, Lasbela University of Agriculture, Water and Marine Sciences, Uthal, Balochistan
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Cite this article

APA

    APA : Ali, N., Wahab, A., & Khan, K. (2022). The Effects of Devaluation of Currency on Economic Growth: The Mediating Role of Current Account Deficit. Global Economics Review, VII(I), 145-156. https://doi.org/10.31703/ger.2022(VII-I).12

CHICAGO

    CHICAGO : Ali, Naveed, Abdul Wahab, and Khalid Khan. 2022. "The Effects of Devaluation of Currency on Economic Growth: The Mediating Role of Current Account Deficit." Global Economics Review, VII (I): 145-156 doi: 10.31703/ger.2022(VII-I).12

HARVARD

    HARVARD : ALI, N., WAHAB, A. & KHAN, K. 2022. The Effects of Devaluation of Currency on Economic Growth: The Mediating Role of Current Account Deficit. Global Economics Review, VII, 145-156.

MHRA

    MHRA : Ali, Naveed, Abdul Wahab, and Khalid Khan. 2022. "The Effects of Devaluation of Currency on Economic Growth: The Mediating Role of Current Account Deficit." Global Economics Review, VII: 145-156

MLA

    MLA : Ali, Naveed, Abdul Wahab, and Khalid Khan. "The Effects of Devaluation of Currency on Economic Growth: The Mediating Role of Current Account Deficit." Global Economics Review, VII.I (2022): 145-156 Print.

OXFORD

    OXFORD : Ali, Naveed, Wahab, Abdul, and Khan, Khalid (2022), "The Effects of Devaluation of Currency on Economic Growth: The Mediating Role of Current Account Deficit", Global Economics Review, VII (I), 145-156

TURABIAN

    TURABIAN : Ali, Naveed, Abdul Wahab, and Khalid Khan. "The Effects of Devaluation of Currency on Economic Growth: The Mediating Role of Current Account Deficit." Global Economics Review VII, no. I (2022): 145-156. https://doi.org/10.31703/ger.2022(VII-I).12