Effect of exchange rate on trade of Afghanistan with its trade partners

Abstract

The exchange rate is one of the most significant variables in the determination of export or import amount, and its shifts cause decrease and increase in the amount of foreign trade, so it is a prominent economic variable for trade policymaking in developing countries. This topic seeks to investigate the effect of exchange rate on Afghanistan’s do business with its partners that includes: Iran, Pakistan, India, and China. Data collected monthly from 2015 through 2017; and also time serious data used for analyses that there are one dependent variable and one independent variable. The ordinary least-squares (OLS) and generalized least squares (GLS) methods estimate 16 models. Results show that the exchange rate of trade partner of Afghanistan has insignificant effects on Afghanistan trade or Afghanistan exchange rate show unimportant effects on Afghanistan trade partners. In some models which coefficients are significant, the R2 is so small, and it shows a low level of explaining. 4 models are useful among the 16 models. Finally, we can say that the exchange rate of Afghanistan and its trade partners don’t affect the trade amount.