Abstract

The aim of the present study is to investigate the effect of exchange rate volatility as well as some important explanatory variables on Pakistan’s bilateral import from her major trading partner countries: USA, UK, Japan, Saudi Arabia, UAE, Germany and Kuwait- during 1982Q1 to 2008Q2. The study has two main objectives: first is to examine whether bilateral import elasticities are significantly different among external suppliers. If this is true, the different policies for each trading partner should be prepared and implemented instead of a single trade policy to decrease imports and ultimately improve trade balance. Second objective is to fill the research gap about the said issue particularly for developing countries. The results suggst that income elasticities are all significant but different in magnitude and exchange rate volatility is negative and statistically significant for Pakistan’s bilateral import from UK in the long run.

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