Working title

The Effect of Exchange Rate on

Unemployment Rate in Pakistan

Thesis Statement
The main objective of this study is to

investigate the effect of Exchange rate on

Unemployment rate in Pakistan.
Hypothesis: To determine whether
unemployment is increasing due to
exchange rate?
Alternate: To determine whether
employment is increasing due to exchange
rate?

Limitations
My limitation would be Karachi
and the other external source is
the internet because this is
where I can find the statistical
data quite flexibly.

Literature Review
The researcher has basically taken asian countries for his research so there is a

vast variety of literature present on the topic of the relationship between

Exchange rate and Unemployment and among other variables as it has been the
topic of great debate over the years especially in terms of its implications on many
developing and developed countries.
In recent decades, Employment in many countries has been declining because of
their openness in trade for example Kim (2005), Colantone (2006) and Yanhui and
Wang (2006) provided some evidence that those countries that have higher
degree of openness are affected more from exchange rate fluctuation in terms of
employment. Filiztekin (2004) also found negative effect of depreciation of Turkish
currency (LIRA) on employment as well as on wages but with the Exchange Rate
and Unemployment 5 Proceedings of 2nd International Conference on Business
Management (ISBN: 978-969-9368-06-6) more affect on wages. However, the
results were not that much shocking because of the high dependency of Turkey on
foreign inputs. But, Alexandre et al (2010) and Nucci and Pozzolo (2004) was of the
view that low technology sector firms and other firms who has more reliance on
imported inputs have their competitiveness and employment negatively affected
by a depreciation of the exchange rate. Further in terms of import and export

orientation, Caglayan and Torres (2010) found negative effect on

investment and unemployment for firms that are in Mexican

manufacturing sector whereas vice versa for import oriented firms.
Another strand of the literature has been focusing on the direct impact of
movements in Real Exchange rates on Unemployment in different
countries like Frenkel and Aros (2006) for Latin America, Akpan (2009) for
Nigeria, Chang and Shen (2011) for Taiwan, South Korea and Singapore
and Burgess and Knetter (1998) for G-7 countries all found positive
relationship between exchange rate and unemployment. A similar view
gave byApergis (2000), Ngandu (2008) and Broll and Sabine (2010) found
positive impact of exchange rate on employment. Others but by having
the involvement of other variables also like Goldberg and Tracy (1999) and
Nucci and Pozzolo (2009) analyzed real exchange rate has significant
effect on average hourly earnings, hours and employment. Further Faria
and Ledesma (2004) analyzed the impact of real wages and real interest
rate on employment was positive while negative of real exchange rate
whereas Hua (2007) for 29 Chinese provinces found that whenever the
other currency appreciates it create negative effect on employment
through three channels (technological channel, export volume channel
and efficiency channel ).

Justification
The researcher has taken out the

information of all the Asian countries.

My topic is specially based on
Pakistan economy so I think much
more can be done with respect to
research apart from what researcher
has already covered of Pakistan
economy in his research.

Theoretical framework
Specific Question: To determine whether

unemployment is increasing due to exchange

rate?
My variables which I have chosen for my
research includes dependent and independent
variables. In dependant we have
unemployment rate , whereas all other are
our independent variables like Exchange rate,
net exports, real interest rate, GDP per capita
and labor productivity, these all are variables
that are chosen for research in order to
evaluate the effect of exchange rate on

Methodology
My methods for data collection would be

questionnaire which I will fill out from the

economics subject teachers from Bahria
University and other institutional teachers and
as well as from few students and I will use
survey method which I will be doing over the
internet in order to investigate the
fluctuations of the Pakistani economy because
of exchange rate.
I will use Regression method. OLS Regression
would be my model because my variable is
continuous.

Resource and Time frame

I think I would need less resources

because I will be collecting

information through the internet and
as well as from the teachers of Bahria
university. So , it would not cost me
much and the time frame required to
complete this research would
probably be 1-2 weeks.

Bibliography
Alexandre, Bao,Cerejeira, Portela (2010). Employment and

Exchange Rates: The Role of Openness and Technology. Open

Econ Rev DOI 10.1007/s11079-010-9191-z .
Abdulnasser and Manuchehr (2006). The response of industry
employment to exchange rate shocks: evidence from panel cointegration, .Applied Economics , vol. 38, 415421.
Alpay Filiztekin (August 2004). Exchange Rates and
Employment in Turkish Manufacturing.
AnsgarBelke .(2005). Exchange Rate Movements and
Unemployment in the EU Accession CountriesA Panel
Analysis. Review of Development Economics , 9(2), 249263..
Bastosy and Wright. (November 21, 2009). Exchange rates and
wages in unionized labor markets

THANKYOU