In this study, we examine an empirical relationship between stock market volatility with the exchange rate and gold prices of an emerging market, “Pakistan”, employing daily and monthly data (PSX-100 Index) covering from 2001: Q3 to 2018: Q2. The study explains the average stock returns by applying MGARCH. Further, it investigates that the volatility in the exchange rate (Rs/US $) and gold prices remain equally strong in bearish and bullish conditions of the stock market by using a quantile regression approach (2001–2018). Additionally, the sample period is divided into two split samples that cover (2001–2007) and (2008–2018) respectively, based on global financial crises and applied similar analysis. The overall results show the negative impact of the exchange rate and gold price volatility on the stock market performance daily (monthly), supporting the argument that the stock market considers the exchange rate and gold price fluctuations as an adverse indicator and reacts negatively.

Economic reforms are inevitable for the development of an economy like Pakistan. During the last two decades, Pakistan has passed through phenomenal economic changes and reforms. In the 1990’s, we had seen privatisation plans initiated by the government as a major economic reform. Similarly, to demonstrate the seriousness of the government in encouraging foreign investment flows in Pakistan; there has been a perceptible liberalisation of the foreign exchange regime. Allied to these efforts, the trade regime was opened up and the maximum tariff rates were cut down to 25 percent with only four slabs and the average tariff rate was lowered to 14 percent. The financial sector too, was restructured and opened up to the foreign competition. Foreign and domestic private banks currently operating in Pakistan have been able to increase their market share to more than 60 percent of assets and deposits. Central to the economic reforms process is a clear progression towards deregulation of the economy. Prices of petroleum products, gas, energy, agricultural commodities and other key inputs are mostly determined by market. Imports and domestic marketing of petroleum products have been deregulated and opened up to the private sector. More importantly, taxation reforms have been prominently on the government’s agenda, with no real reforms undertaken. This is another area where policy makers and business community has innumerable grievances and dissatisfaction with the arbitrary nature of tax administration.

The paper highlights the main issues involved in the theoretical and empirical estimation of the money demand function in Pakistan. Much of the recent empirical work on money demand has used income as a scale variable. Our work seeks to assess the relevant importance of the permanent income as an argument of the demand function for money. The results of our estimation indicate that a stable money demand function exists using permanent income.

We examine the experience of the Islamic banks with respect to the global financial crisis of 2007-09 (GFC) and find that these were not immune from the ravages of the GFC. In particular, our analysis of the banking sector in Malaysia shows that the Islamic banks were adversely affected by it to a greater extend then were the conventional banks. Post-December 2008, the capital adequacy ratios for these banks were significantly lower, the loan loss ratios significantly higher, and their total loss reserves and secondary liquidity positions deteriorated.

This paper analyzes the impact of the macroeconomic environment on Pakistan’s manufacturing sector, emphasizing in particular the role of fiscal and monetary policies in shaping incentives for industrial investment. Arguably, Pakistan’s macroeconomic fundamentals in the last two decades have remained fragile, resulting in severe macroeconomic imbalances that have contributed to macroeconomic instability and hampered private investment in aggregate as well as in the manufacturing sector. Furthermore, macroeconomic stabilization policies have often failed to produce the desired results owing to the lack of coordination between monetary and fiscal policies. Pakistan’s economy has thus lived on borrowed money and time and on rent-seeking behavior. Although some recent macroeconomic indicators have improved slightly, fundamental weaknesses remain. In particular, the recent improvement in the current account deficit was driven largely by the high inflow of remittances, coupled with financial engineering such as loan payments from the International Monetary Fund, “friendly” money, European Union bonds, and Islamic sukuk. It is imperative to think about the consequences of a leveraged reliance on remittances in the aftermath of falling oil prices and global deflation. Prudent macroeconomic management aimed at consolidating public finances and controlling inflationary pressures is essential to boost industrial investment and yield sustainable growth.