Suppose that Pakistanis decide to increase their saving. If the elasticity of PAK exports with respect to the real exchange rate is very low, will this increase in private saving have a large or small effect on the PAK real exchange rate? Explain with help of diagrams and in word.
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Saving-investment Behaviour in Pakistan
This paper explores the saving-investment behaviour in Pakistan by identifying their patterns over time and across selected Asian countries. Further potential determinants were empirically tested, based on theoretical foundations of modelling for saving and investment behaviour. Savings in Pakistan for our sample period showed a positive response to GDP growth and government current expenditure while it remained insensitive to interest rates. On the other side, domestic savings and short-run expected returns positively affected investment whereas uncertainty reduced investment.
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