Basit Ali

The current study analyzes the impact of devaluation of domestic currency on economic growth and for this purpose, the time series data is being used. The Conceptual framework of the present theory is based on the J-curve (1954). The ARDL Bound test approach is being used to test the presence of long run and short run relationship. For this analysis, data set of Pakistan is being used over the period 1990-2018. For the stability of the model, CUSUM and CUSUMSQ test are also used. The results of the current study show that devaluation are significantly correlated with economic growth and ARDL-Bound test also show the relationship in short-run as well as, long-run relationship. Devaluation in domestic currency is useful and, however, harmful for the country. It depend upon the policy maker that how they handle the situation. For the short run analysis, ECM suggests that model is stable and any shock that diverge the economy will converge soon


Key word: Devaluation, Economic Growth, Private Domestic Investment, Exchange Rate