The Financial Crisis’ Lack of Impact on IB Programs

The past year everyone in Greece is complaining about the financial crisis that hit the country during the autumn of 2009. Although in the beginning most people believed that the country would be able to go through it without major problems, they were soon proven wrong. Not only Greece wasn’t able to manage the crisis but almost faced bankruptcy and had to go under the International Monetary Fund (IMF) in order to survive. The financial measures enforced by the IMF affected the financial situation of all citizens of Greece. Although the richest families even started facing financial problems, the number of students graduating from private schools not only did not have a decrease, but in contrast had a small increase. In Greece, in order to be sure one will study abroad, it would be best the student would follow the International Baccalaureate program, mostly referred to as IB. Since the first year the IB program came to Greece by Moraitis School (1984) the number of students deciding to follow it and go study abroad has been increasing steadily. But not only has the number of students graduating from private high schools increased, during a very severe financial crisis, but the percentage of students going to study abroad through the IB program has remained stable. Despite the fact that the tuition fees for the International Baccalaureate are more than those for the regular Greek high school program offered by private schools. During the academic years prior to the economic crisis, the IB program had a steady increase of 10% when it came to its students. More specifically the academic year 2006/07 the percentage of students attending the program was 50 % and a year later it had come to a total of 60%. A year later, the academic year 2008/09, the percentage of students rose to a 70% and as it was the year before the financial crisis hit the country, it was the last year there was an increase in the number of students applying for the IB program. Since last year, the academic year 2009/10, the percentage of IB students has remained stable at a 60% despite the fact that the economy of the country is in a worse state during the past 6 months. Moraitis School statistics). Mrs. Zalma, a mother of three, out of which the two are graduates and the youngest one will go to university next fall said â€Å"Despite the economic crisis, I agreed with my son to follow the IB program, as I saw that my daughter who graduated from a foreign university has more work opportunities than my older son who finished a Greek university. † The fact that there are more opportunities for a career in foreign countries due to the economic crisis is a major reason why many students decide to go study abroad. Not only because certain specialities are different from country to country (such as law), but also because parents and students do not trust the Greek universities to provide them a high standard certificate, when it comes to universities other from architecture, medicine law and economics. As Mrs. Papadopoulou said, â€Å"I don’t mind paying higher tuition fees for our son’s education in the middle of an economic crisis, as I know he will have a better future than staying to study in Greece, due to the higher standards of the certificates of foreign universities. This is the way most parents sending their children study abroad think, having in mind not what speciality their children are going to choose but if the university they decide to attend to has a good reputation and therefore credibility or not. But this is not only the way of thought of parents that are worried about the future of their children. As mentioned above, it is also the students that nowadays do not trust the power of a certificate from a Greek institution. During the past decade that I have been working for Moraitis School, I have seen more and more students wanting to study abroad, as they do not trust the Greek educational system. They feel more confident having a bachelor degree from foreign universities, especially from the States, United Kingdom and France. † said Mr. Edippidis, maths teacher in Moraitis School. This shows that even students have the same angst as their parents concerning their future and want to go out to the workplace equipped with a strong degree, especially now in the midst of this financial crisis. In order to achieve this and feel confident they choose a more expensive but more promising program to make sure they will have a place in the universities of their choice. This way, as the trust of students towards the Greek universities is fading and the workplace in Greece does not offer the same opportunities as other countries, students and parents turn towards the educational institutes of those countries. And as they feel they will a have a better chance of entering those universities through the IB program, families do not care giving a little more to education, despite the difficult financial situation in Greece.

Chapter 18 The Weighing of the Wands

When Harry woke up on Sunday morning, it took him a moment to remember why he felt so miserable and worried. Then the memory of the previous night rolled over him. He sat up and ripped back the curtains of his own four-poster, intending to talk to Ron, to force Ron to believe him – only to find that Ron's bed was empty; he had obviously gone down to breakfast. Harry dressed and went down the spiral staircase into the common room. The moment he appeared, the people who had already finished breakfast broke into applause again. The prospect of going down into the Great Hall and facing the rest of the Gryffindors, all treating him like some sort of hero, was not inviting; it was that, however, or stay here and allow himself to be cornered by the Creevey brothers, who were both beckoning frantically to him to join them. He walked resolutely over to the portrait hole, pushed it open, climbed out of it, and found himself face-to-face with Hermione. â€Å"Hello,† she said, holding up a stack of toast, which she was carrying in a napkin. â€Å"I brought you this†¦.Want to go for a walk?† â€Å"Good idea,† said Harry gratefully. They went downstairs, crossed the entrance hall quickly without looking in at the Great Hall, and were soon striding across the lawn toward the lake, where the Durmstrang ship was moored, reflected blackly in the water. It was a chilly morning, and they kept moving, munching their toast, as Harry told Hermione exactly what had happened after he had left the Gryffindor table the night before. To his immense relief, Hermione accepted his story without question. â€Å"Well, of course I knew you hadn't entered yourself,† she said when he'd finished telling her about the scene in the chamber off the Hall. â€Å"The look on your face when Dumbledore read out your name! But the question is, who did put it in? Because Moody's right, Harry†¦I don't think any student could have done it†¦they'd never be able to fool the Goblet, or get over Dumbledore's -â€Å" â€Å"Have you seen Ron?† Harry interrupted. Hermione hesitated. â€Å"Erm†¦yes†¦he was at breakfast,† she said. â€Å"Does he still think I entered myself?† â€Å"Well†¦no, I don't think so†¦not really,† said Hermione awkwardly. â€Å"What's that supposed to mean, ‘not really'?† â€Å"Oh Harry, isn't it obvious?† Hermione said despairingly. â€Å"He's jealous!† â€Å"Jealous?† Harry said incredulously. â€Å"Jealous of what? He wants to make a prat of himself in front of the whole school, does he?† â€Å"Look,† said Hermione patiently, â€Å"it's always you who gets all the attention, you know it is. I know it's not your fault,† she added quickly, seeing Harry open his mouth furiously. â€Å"I know you don't ask for it†¦but – well – you know, Ron's got all those brothers to compete against at home, and you're his best friend, and you're really famous – he's always shunted to one side whenever people see you, and he puts up with it, and he never mentions it, but I suppose this is just one time too many†¦Ã¢â‚¬  â€Å"Great,† said Harry bitterly. â€Å"Really great. Tell him from me I'll swap any time he wants. Tell him from me he's welcome to it†¦.People gawping at my forehead everywhere I go†¦Ã¢â‚¬  â€Å"I'm not teiling him anything,† Hermione said shortly. â€Å"Tell him yourself. It's the only way to sort this out.† â€Å"I'm not running around after him trying to make him grow up!† Harry said, so loudly that several owls in a nearby tree took flight in alarm. â€Å"Maybe he'll believe I'm not enjoying myself once I've got my neck broken or -â€Å" â€Å"That's not funny,† said Hermione quietly. â€Å"That's not funny at all.† She looked extremely anxious. â€Å"Harry, I've been thinking – you know what we've got to do, don't you? Straight away, the moment we get back to the castle?† â€Å"Yeah, give Ron a good kick up the -â€Å" â€Å"Write to Sirius. You've got to tell him what's happened. He asked you to keep him posted on everything that's going on at Hogwarts†¦.It's almost as if he expected something like this to happen. I brought some parchment and a quill out with me -â€Å" â€Å"Come off it,† said Harry, looking around to check that they couldn't be overheard, but the grounds were quite deserted. â€Å"He came back to the country just because my scar twinged. He'll probably come bursting right into the castle if I tell him someone's entered me in the Triwizard Tournament -â€Å" â€Å"He'd want you to tell him,† said Hermione sternly. â€Å"He's going to find out anyway.† â€Å"How?† â€Å"Harry, this isn't going to be kept quiet,† said Hermione, very seriously. â€Å"This tournament's famous, and you're famous. I'll be really surprised if there isn't anything in the Daily Prophet about you competing†¦.You're already in half the books about You-Know-Who, you know†¦and Sirius would rather hear it from you, I know he would.† â€Å"Okay, okay, I'll write to him,† said Harry, throwing his last piece of toast into the lake. They both stood and watched it floating there for a moment, before a large tentacle rose out of the water and scooped it beneath the surface. Then they returned to the castle. â€Å"Whose owl am I going to use?† Harry said as they climbed the stairs. â€Å"He told me not to use Hedwig again.† â€Å"Ask Ron if you can borrow -â€Å" â€Å"I'm not asking Ron for anything,† Harry said flatly. â€Å"Well, borrow one of the school owls, then, anyone can use them,† said Hermione. They went up to the Owlery. Hermione gave Harry a piece of parchment, a quill, and a bottle of ink, then strolled around the long lines of perches, looking at all the different owls, while Harry sat down against a wall and wrote his letter. Dear Sirius, You told me to keep you posted on what's happening at Hogwarts, so here goes – I don't know if you've heard, but the Triwizard Tournament's happening this year and on Saturday night I got picked as a fourth champion. I don't who put my name in the Goblet of Fire, because I didn't. The other Hogwarts champion is Cedric Diggory, from Hufflepuff. He paused at this point, thinking. He had an urge to say something about the large weight of anxiety that seemed to have settled inside his chest since last night, but he couldn't think how to translate this into words, so he simply dipped his quill back into the ink bottle and wrote, Hope you're okay, and Buckbeak – Harry â€Å"Finished,† he told Hermione, getting to his feet and brushing straw off his robes. At this, Hedwig fluttered down onto his shoulder and held out her leg. â€Å"I can't use you,† Harry told her, looking around for the school owls. â€Å"I've got to use one of these.† Hedwig gave a very loud hoot and took off so suddenly that her talons cut into his shoulder. She kept her back to Harry all the time he was tying his letter to the leg of a large barn owl. When the barn owl had flown off, Harry reached out to stroke Hedwig, but she clicked her beak furiously and soared up into the rafters out of reach. â€Å"First Ron, then you,† Harry said angrily. â€Å"This isn't my fault.† If Harry had thought that matters would improve once everyone got used to the idea of him being champion, the following day showed him how mistaken he was. He could no longer avoid the rest of the school once he was back at lessons – and it was clear that the rest of the school, just like the Gryffindors, thought Harry had entered himself for the tournament. Unlike the Gryffindors, however, they did not seem impressed. The Hufflepuffs, who were usually on excellent terms with the Gryffindors, had turned remarkably cold toward the whole lot of them. One Herbology lesson was enough to demonstrate this. It was plain that the Hufflepuffs felt that Harry had stolen their champion's glory; a feeling exacerbated, perhaps, by the fact that Hufflepuff House very rarely got any glory, and that Cedric was one of the few who had ever given them any, having beaten Gryffindor once at Quidditch. Ernie Macmillan and Justin FinchFletchley, with whom Harry normally got on very well, did not talk to him even though they were repotting Bouncing Bulbs at the same tray – though they did laugh rather unpleasantly when one of the Bouncing Bulbs wriggled free from Harry's grip and smacked him hard in the face. Ron wasn't talking to Harry either. Hermione sat between them, making very forced conversation, but though both answered her normally, they avoided making eye contact with each other. Harry thought even Profes sor Sprout seemed distant with him – but then, she was Head of Hufflepuff House. He would have been looking forward to seeing Hagrid under normal circumstances, but Care of Magical Creatures meant seeing the Slytherins too – the first time he would come face-to-face with them since becoming champion. Predictably, Malfoy arrived at Hagrid's cabin with his familiar sneer firmly in place. â€Å"Ah, look, boys, it's the champion,† he said to Crabbe and Goyle the moment he got within earshot of Harry. â€Å"Got your autograph books? Better get a signature now, because I doubt he's going to be around much longer†¦.Half the Triwizard champions have died†¦how long d'you reckon you're going to last, Potter? Ten minutes into the first task's my bet.† Crabbe and Goyle guffawed sycophantically, but Malfoy had to stop there, because Hagrid emerged from the back of his cabin balancing a teetering tower of crates, each containing a very large Blast-Ended Skrewt. To the class's horror, Hagrid proceeded to explain that the reason the skrewts had been killing one another was an excess of pent-up energy, and that the solution would be for each student to fix a leash on a skrewt and take it for a short walk. The only good thing about this plan was that it distracted Malfoy completely. â€Å"Take this thing for a walk?† he repeated in disgust, staring into one of the boxes. â€Å"And where exactly are we supposed to fix the leash? Around the sting, the blasting end, or the sucker?† â€Å"Roun' the middle,† said Hagrid, demonstrating. â€Å"Er – yeh might want ter put on yer dragon-hide gloves, jus' as an extra precaution, like. Harry – you come here an' help me with this big one†¦.† Hagrid's real intention, however, was totalk to Harry away from the rest of the class. He waited until everyone else had set off with their skrewts, then turned to Harry and said, very seriously, â€Å"So – yer competin', Harry. In the tournament. School champion.† â€Å"One of the champions,† Harry corrected him. Hagrid's beetle-black eyes looked very anxious under his wild eyebrows. â€Å"No idea who put yeh in fer it, Harry?† â€Å"You believe I didn't do it, then?† said Harry, concealing with difficulty the rush of gratitude he felt at Hagrid's words. â€Å"Course I do,† Hagrid grunted. â€Å"Yeh say it wasn' you, an' I believe yeh – an' Dumbledore believes yer, an' all.† â€Å"Wish I knew who did do it,† said Harry bitterly. The pair of them looked out over the lawn; the class was widely scattered now, and all in great difficulty. The skrewts were now over three feet long, and extremely powerful. No longer shell-less and colorless, they had developed a kind of thick, grayish, shiny armor. They looked like a cross between giant scorpions and elongated crabs- but still without recognizable heads or eyes. They had become immensely strong and very hard to control. â€Å"Look like they're havin' fun, don' they?† Hagrid said happily. Harry assumed he was talking about the skrewts, because his classmates certainly weren't; every now and then, with an alarming bang, one of the skrewts' ends would explode, causing it to shoot forward several yards, and more than one person was being dragged along on their stomach, trying desperately to get back on their feet. â€Å"Ah, I don' know, Harry,† Hagrid sighed suddenly, looking back down at him with a worried expression on his face. â€Å"School champion†¦everythin' seems ter happen ter you, doesn' it?† Harry didn't answer. Yes, everything did seem to happen to him†¦that was more or less what Hermione had said as they had walked around the lake, and that was the reason, according to her, that Ron was no longer talking to him. The next few days were some of Harry's worst at Hogwarts. The closest he had ever come to feeling like this had been during those months, in his second year, when a large part of the school had suspected him of attacking his fellow students. But Ron had been on his side then. He thought he could have coped with the rest of the school's behavior if he could just have had Ron back as a friend, but he wasn't going to try and persuade Ron to talk to him if Ron didn't want to. Nevertheless, it was lonely with dislike pouring in on him from all sides. He could understand the Hufflepuffs' attitude, even if he didn't like it; they had their own champion to support. He expected nothing less than vicious insults from the Slytherins – he was highly unpopular there and always had been, because he had helped Gryffindor beat them so often, both at Quidditch and in the Inter-House Championship. But he had hoped the Ravenclaws might have found it in their hearts to support him as much as Cedric. He was wrong, however. Most Ravenclaws seemed to think that he had been desperate to earn himself a bit more fame by tricking the goblet into accepting his name. Then there was the fact that Cedric looked the part of a champion so much more than he did. Exceptionally handsome, with his straight nose, dark hair, and gray eyes, it was hard to say who was receiving more admiration these days, Cedric or Viktor Krum. Harry actually saw the same sixth-year girls who had been so keen to get Krum's autograph begging Cedric to sign their school bags one lunchtime. Meanwhile there was no reply from Sirius, Hedwig was refusing to come anywhere near him, Professor Trelawney was predicting his death with even more certainty than usual, and he did so badly at Summoning Charms in Professor Flitwick's class that he was given extra homework – the only person to get any, apart from Neville. â€Å"It's really not that difficult, Harry,† Hermione tried to reassure him as they left Flitwick's class – she had been making objects zoom across the room to her all lesson, as though she were some sort of weird magnet for board dusters, wastepaper baskets, and lunascopes. â€Å"You just weren't concentrating properly -â€Å" â€Å"Wonder why that was,† said Harry darkly as Cedric Diggory walked past, surrounded by a large group of simpering girls, all of whom looked at Harry as though he were a particularly large Blast-Ended Skrewt. â€Å"Still – never mind, eh? Double Potions to look forward to this afternoon†¦Ã¢â‚¬  Double Potions was always a horrible experience, but these days it was nothing short of torture. Being shut in a dungeon for an hour and a half with Snape and the Slytherins, all of whom seemed determined to punish Harry as much as possible for daring to become school champion, was about the most unpleasant thing Harry could imagine. He had already struggled through one Friday's worth, with Hermione sitting next to him intoning â€Å"ignore them, ignore them, ignore them† under her breath, and he couldn't see why today should be any better. When he and Hermione arrived at Snape's dungeon after lunch, they found the Slytherins waiting outside, each and every one of them wearing a large badge on the front of his or her robes. For one wild moment Harry thought they were S.P.E.W. badges – then he saw that they all bore the same message, in luminous red letters that burnt brightly in the dimly lit underground passage: SUPPORT CEDRIC DIGGORY- THE REAL HOGWARTS CHAMPION! â€Å"Like them, Potter?† said Malfoy loudly as Harry approached. â€Å"And this isn't all they do – look!† He pressed his badge into his chest, and the message upon it vanished, to be replaced by another one, which glowed green: POTTER STINKS! The Slytherins howled with laughter. Each of them pressed their badges too, until the message POTTER STINKS was shining brightly all around Harry. He felt the heat rise in his face and neck. â€Å"Oh very funny,† Hermione said sarcastically to Pansy Parkinson and her gang of Slytherin girls, who were laughing harder than anyone, â€Å"really witty.† Ron was standing against the wall with Dean and Seamus. He wasn't laughing, but he wasn't sticking up for Harry either. â€Å"Want one, Granger?† said Malfoy, holding out a badge to Hermione. â€Å"I've got loads. But don't touch my hand, now. I've just washed it, you see; don't want a Mudblood sliming it up.† Some of the anger Harry had been feeling for days and days seemed to burst through a dam in his chest. He had reached for his wand before he'd thought what he was doing. People all around them scrambled out of the way, backing down the corridor. â€Å"Harry!† Hermione said warningly. â€Å"Go on, then, Potter,† Malfoy said quietly, drawing out his own wand. â€Å"Moody's not here to look after you now – do it, if you've got the guts -â€Å" For a split second, they looked into each other's eyes, then, at exactly the same time, both acted. â€Å"Funnunculus!† Harry yelled. â€Å"Densaugeo!† screamed Malfoy. Jets of light shot from both wands, hit each other in midair, and ricocheted off at angles – Harry's hit Goyle in the face, and Malfoy's hit Hermione. Goyle bellowed and put his hands to his nose, where great ugly boils were springing up – Hermione, whimpering in panic, was clutching her mouth. â€Å"Hermione!† Ron had hurried forward to see what was wrong with her; Harry turned and saw Ron dragging Hermione's hand away from her face. It wasn't a pretty sight. Hermione's front teeth – already larger than average – were now growing at an alarming rate; she was looking more and more like a beaver as her teeth elongated, past her bottom lip, toward her chin – panic-stricken, she felt them and let out a terrified cry. â€Å"And what is all this noise about?† said a soft, deadly voice. Snape had arrived. The Slytherins clamored to give their explanations; Snape pointed a long yellow finger at Malfoy and said, â€Å"Explain.† â€Å"Potter attacked me, sir -â€Å" â€Å"We attacked each other at the same time!† Harry shouted. â€Å"- and he hit Goyle – look -â€Å" Snape examined Goyle, whose face now resembled something that would have been at home in a book on poisonous fungi. â€Å"Hospital wing, Goyle,† Snape said calmly. â€Å"Malfoy got Hermione!† Ron said. â€Å"Look!† He forced Hermione to show Snape her teeth – she was doing her best to hide them with her hands, though this was difficult as they had now grown down past her collar. Pansy Parkinson and the other Slytherin girls were doubled up with silent giggles, pointing at Hermione from behind Snape's back. Snape looked coldly at Hermione, then said, â€Å"I see no difference.† Hermione let out a whimper; her eyes filled with tears, she turned on her heel and ran, ran all the way up the corridor and out of sight. It was lucky, perhaps, that both Harry and Ron started shouting at Snape at the same time; lucky their voices echoed so much in the stone corridor, for in the confused din, it was impossible for him to hear exactly what they were calling him. He got the gist, however. â€Å"Let's see,† he said, in his silkiest voice. â€Å"Fifty points from Gryffindor and a detention each for Potter and Weasley. Now get inside, or it'll be a week's worth of detentions.† Harry's ears were ringing. The injustice of it made him want to curse Snape into a thousand slimy pieces. He passed Snape, walked with Ron to the back of the dungeon, and slammed his bag down onto the table. Ron was shaking with anger too – for a moment, it felt as though everything was back to normal between them, but then Ron turned and sat down with Dean and Seamus instead, leaving Harry alone at his table. On the other side of the dungeon, Malfoy turned his back on Snape and pressed his badge, smirking. POTTER STINKS flashed once more across the room. Harry sat there staring at Snape as the lesson began, picturing horrific things happening to him†¦.If only he knew how to do the Cruciatus Curse†¦he'd have Snape flat on his back like that spider, jerking and twitching†¦. â€Å"Antidotes!† said Snape, looking around at them all, his cold black eyes glittering unpleasantly. â€Å"You should all have prepared your recipes now. I want you to brew them carefully, and then, we will be selecting someone on whom to test one†¦Ã¢â‚¬  Snape's eyes met Harry's, and Harry knew what was coming. Snape was going to poison him. Harry imagined picking up his cauldron, and sprinting to the front of the class, and bringing it down on Snape's greasy head – And then a knock on the dungeon door burst in on Harry's thoughts. It was Colin Creevey; he edged into the room, beaming at Harry, and walked up to Snape's desk at the front of the room. â€Å"Yes?† said Snape curtly. â€Å"Please, sir, I'm supposed to take Harry Potter upstairs.† Snape stared down his hooked nose at Colin, whose smile faded from his eager face. â€Å"Potter has another hour of Potions to complete,† said Snape coldly. â€Å"He will come upstairs when this class is finished.† Colin went pink. â€Å"Sir – sir, Mr. Bagman wants him,† he said nervously. â€Å"All the champions have got to go, I think they want to take photographs†¦Ã¢â‚¬  Harry would have given anything he owned to have stopped Colin saying those last few words. He chanced half a glance at Ron, but Ron was staring determinedly at the ceiling. â€Å"Very well, very well,† Snape snapped. â€Å"Potter, leave your things here, I want you back down here later to test your antidote.† â€Å"Please, sir – he's got to take his things with him,† squeaked Cohn. â€Å"All the champions†¦Ã¢â‚¬  â€Å"Very well!† said Snape. â€Å"Potter – take your bag and get out of my sight!† Harry swung his bag over his shoulder, got up, and headed for the door. As he walked through the Slytherin desks, POTTER STINKS flashed at him from every direction. â€Å"It's amazing, isn't it, Harry?† said Colin, starting to speak the moment Harry had closed the dungeon door behind him. â€Å"Isn't it, though? You being champion?† â€Å"Yeah, really amazing,† said Harry heavily as they set off toward the steps into the entrance hall. â€Å"What do they want photos for, Colin?† â€Å"The Daily Prophet, I think!† â€Å"Great,† said Harry dully. â€Å"Exactly what I need. More publicity.† â€Å"Good luck!† said Colin when they had reached the right room. Harry knocked on the door and entered. He was in a fairly small classroom; most of the desks had been pushed away to the back of the room, leaving a large space in the middle; three of them, however, had been placed end-to-end in front of the blackboard and covered with a long length of velvet. Five chairs had been set behind the velvet-covered desks, and Ludo Bagman was sitting in one of them, talking to a witch Harry had never seen before, who was wearing magenta robes. Viktor Krum was standing moodily in a corner as usual and not talking to anybody. Cedric and Fheur were in conversation. Fheur looked a good deal happier than Harry had seen her so far; she kept throwing back her head so that her long silvery hair caught the light. A paunchy man, holding a large black camera that was smoking slightly, was watching Fleur out of the corner of his eye. Bagman suddenly spotted Harry, got up quickly, and bounded forward. â€Å"Ah, here he is! Champion number four! In you come, Harry, in you come†¦nothing to worry about, it's just the wand weighing ceremony, the rest of the judges will be here in a moment -â€Å" â€Å"Wand weighing?† Harry repeated nervously. â€Å"We have to check that your wands are fully functional, no problems, you know, as they're your most important tools in the tasks ahead,† said Bagman. â€Å"The expert's upstairs now with Dumbledore. And then there's going to be a little photo shoot. This is Rita Skeeter,† he added, gesturing toward the witch in magenta robes. â€Å"She's doing a small piece on the tournament for the Daily Prophet†¦.† â€Å"Maybe not that small, Ludo,† said Rita Skeeter, her eyes on Harry. Her hair was set in elaborate and curiously rigid curls that contrasted oddly with her heavy-jawed face. She wore jeweled spectacles. The thick fingers clutching her crocodile-skin handbag ended in two-inch nails, painted crimson. â€Å"I wonder if I could have a little word with Harry before we start?† she said to Bagman, but still gazing fixedly at Harry. â€Å"The youngest champion, you know†¦to add a bit of color?† â€Å"Certainly!† cried Bagman. â€Å"That is – if Harry has no objection?† â€Å"Er -† said Harry. â€Å"Lovely,† said Rita Skeeter, and in a second, her scarlet-taloned fingers had Harry's upper arm in a surprisingly strong grip, and she was steering him out of the room again and opening a nearby door. â€Å"We don't want to be in there with all that noise,† she said. â€Å"Let's see†¦ah, yes, this is nice and cozy.† It was a broom cupboard. Harry stared at her. â€Å"Come along, dear – that's right – lovely,† said Rita Skeeter again, perching herself precariously upon an upturned bucket, pushing Harry down onto a cardboard box, and closing the door, throwing them into darkness. â€Å"Let's see now†¦Ã¢â‚¬  She unsnapped her crocodile-skin handbag and pulled out a handful of candles, which she lit with a wave of her wand and magicked into midair, so that they could see what they were doing. â€Å"You won't mind, Harry, if I use a Quick-Quotes Quill? It leaves me free to talk to you normally†¦Ã¢â‚¬  â€Å"A what?† said Harry. Rita Skeeter's smile widened. Harry counted three gold teeth. She reached again into her crocodile bag and drew out a long acid-green quill and a roll of parchment, which she stretched out between them on a crate of Mrs. Skower's All-Purpose Magical Mess Remover. She put the tip of the green quill into her mouth, sucked it for a moment with apparent relish, then placed it upright on the parchment, where it stood balanced on its point, quivering slightly. â€Å"Testing†¦my name is Rita Skeeter, Daily Prophet reporter.† Harry hooked down quickly at the quill. The moment Rita Skeeter had spoken, the green quill had started to scribble, skidding across the parchment: Attractive blonde Rita Skeeter, forty-three, who's savage quill has punctured many inflated reputations – â€Å"Lovely,† said Rita Skeeter, yet again, and she ripped the top piece of parchment off, crumpled it up, and stuffed it into her handbag. Now she leaned toward Harry and said, â€Å"So, Harry†¦what made you decide to enter the Triwizard Tournament?† â€Å"Er -† said Harry again, but he was distracted by the quill. Even though he wasn't speaking, it was dashing across the parchment, and in its wake he could make out a fresh sentence: An ugly scar, souvenier of a tragic past, disfigures the otherwise charming face of Harry Potter, whose eyes – â€Å"Ignore the quill, Harry,† said Rita Skeeter firmly. Reluctantly Harry looked up at her instead. â€Å"Now – why did you decide to enter the tournament, Harry?† â€Å"I didn't,† said Harry. â€Å"I don't know how my name got into the Goblet of Fire. I didn't put it in there.† Rita Skeeter raised one heavily penciled eyebrow. â€Å"Come now, Harry, there's no need to be scared of getting into trouble. We all know you shouldn't really have entered at all. But don't worry about that. Our readers hove a rebel.† â€Å"But I didn't enter,† Harry repeated. â€Å"I don't know who -â€Å" â€Å"How do you feel about the tasks ahead?† said Rita Skeeter. â€Å"Excited? Nervous?† â€Å"I haven't really thought†¦yeah, nervous, I suppose,† said Harry. His insides squirmed uncomfortably as he spoke. â€Å"Champions have died in the past, haven't they?† said Rita Skeeter briskly. â€Å"Have you thought about that at all?† â€Å"Well†¦they say it's going to be a lot safer this year,† said Harry. The quill whizzed across the parchment between them, back and forward as though it were skating. â€Å"Of course, you've looked death in the face before, haven't you?† said Rita Skeeter, watching him closely. â€Å"How would you say that's affected you?† â€Å"Er,† said Harry, yet again. â€Å"Do you think that the trauma in your past might have made you keen to prove yourself? To live up to your name? Do you think that perhaps you were tempted to enter the Triwizard Tournament because -â€Å" â€Å"I didn't enter,† said Harry, starting to feel irritated. â€Å"Can you remember your parents at all?† said Rita Skeeter, talking over him. â€Å"No,† said Harry. â€Å"How do you think they'd feel if they knew you were competing in the Triwizard Tournament? Proud? Worried? Angry?† Harry was feeling really annoyed now. How on earth was he to know how his parents would feel if they were alive? He could feel Rita Skeeter watching him very intently. Frowning, he avoided her gaze and hooked down at words the quill had just written: Tears fill those startlingly green eyes as our conversation turns to the parents he can barely remember. â€Å"I have NOT got tears in my eyes!† said Harry loudly. Before Rita Skeeter could say a word, the door of the broom cupboard was pulled open. Harry looked around, blinking in the bright light. Albus Dumbledore stood there, looking down at both of them, squashed into the cupboard. â€Å"Dumbledore!† cried Rita Skeeter, with every appearance of delight – but Harry noticed that her quill and the parchment had suddenly vanished from the box of Magical Mess Remover, and Rita's clawed fingers were hastily snapping shut the clasp of her crocodile-skin bag. â€Å"How are you?† she said, standing up and holding out one of her large, mannish hands to Dumbledore. â€Å"I hope you saw my piece over the summer about the International Confederation of Wizards' Conference?† â€Å"Enchantingly nasty,† said Dumbledore, his eyes twinkling. â€Å"I particularly enjoyed your description of me as an obsolete dingbat.† Rita Skeeter didn't look remotely abashed. â€Å"I was just making the point that some of your ideas are a little old-fashioned, Dumbhedore, and that many wizards in the street -â€Å" â€Å"I will be delighted to hear the reasoning behind the rudeness, Rita,† said Dumbledore, with a courteous bow and a smile, â€Å"but I'm afraid we will have to discuss the matter later. The Weighing of the Wands is about to start, and it cannot take place if one of our champions is hidden in a broom cupboard.† Very glad to get away from Rita Skeeter, Harry hurried back into the room. The other champions were now sitting in chairs near the door, and he sat down quickly next to Cedric, hooking up at the velvet-covered table, where four of the five judges were now sitting – Professor Karkaroff, Madame Maxime, Mr. Crouch, and Ludo Bagman. Rita Skeeter settled herself down in a corner; Harry saw her slip the parchment out of her bag again, spread it on her knee, suck the end of the Quick-Quotes Quill, and place it once more on the parchment. â€Å"May I introduce Mr. Ollivander?† said Dumbledore, taking his place at the judges' table and talking to the champions. â€Å"He will be checking your wands to ensure that they are in good condition before the tournament.† Harry hooked around, and with a jolt of surprise saw an old wizard with large, pale eyes standing quietly by the window. Harry had met Mr. Ollivander before – he was the wand-maker from whom Harry had bought his own wand over three years ago in Diagon Alley. â€Å"Mademoiselle Delacour, could we have you first, please?† said Mr. Ollivander, stepping into the empty space in the middle of the room. Fleur Delacour swept over to Mr. Olhivander and handed him her wand. â€Å"Hmm†¦Ã¢â‚¬  he said. He twirled the wand between his long fingers like a baton and it emitted a number of pink and gold sparks. Then he held it chose to his eyes and examined it carefully. â€Å"Yes,† he said quietly, â€Å"nine and a half inches†¦inflexible†¦rosewood†¦and containing†¦dear me†¦Ã¢â‚¬  â€Å"An ‘air from ze ‘ead of a veela,† said Fleur. â€Å"One of my grandmuzzer's.† So Fleur was part veela, thought Harry, making a mental note to tell Ron†¦then he remembered that Ron wasn't speaking to him. â€Å"Yes,† said Mr. Ollivander, â€Å"yes, I've never used veela hair myself, of course. I find it makes for rather temperamental wands†¦however, to each his own, and if this suits you†¦Ã¢â‚¬  Mr. Ollivander ran his fingers along the wand, apparently checking for scratches or bumps; then he muttered, â€Å"Orchideous!† and a bunch of flowers burst from the wand tip. â€Å"Very well, very well, it's in fine working order,† said Mr. Ollivander, scooping up the flowers and handing them to Fleur with her wand. â€Å"Mr. Diggory, you next.† Fleur glided back to her seat, smiling at Cedric as he passed her. â€Å"Ah, now, this is one of mine, isn't it?† said Mr. Ollivander, with much more enthusiasm, as Cedric handed over his wand. â€Å"Yes, I remember it well. Containing a single hair from the tail of a particularly fine male unicorn†¦must have been seventeen hands; nearly gored me with his horn after I plucked his tail. Twelve and a quarter inches†¦ash†¦pleasantly springy. It's in fine condition†¦You treat it regularly?† â€Å"Polished it last night,† said Cedric, grinning. Harry hooked down at his own wand. He could see finger marks all over it. He gathered a fistful of robe from his knee and tried to rub it clean surreptitiously. Several gold sparks shot out of the end of it. Fleur Delacour gave him a very patronizing look, and he desisted. Mr. Ollivander sent a stream of silver smoke rings across the room from the tip of Cedric's wand, pronounced himself satisfied, and then said, â€Å"Mr. Krum, if you please.† Viktor Krum got up and slouched, round-shouldered and duck-footed, toward Mr. Ollivander. He thrust out his wand and stood scowling, with his hands in the pockets of his robes. â€Å"Hmm,† said Mr. Olhivander, â€Å"this is a Gregorovitch creation, unless I'm much mistaken? A fine wand-maker, though the styling is never quite what I†¦however†¦Ã¢â‚¬  He lifted the wand and examined it minutely, turning it over and over before his eyes. â€Å"Yes†¦hornbeam and dragon heartstring?† he shot at Krum, who nodded. â€Å"Rather thicker than one usually sees†¦quite rigid†¦ten and a quarter inches†¦Avis!† The hornbeam wand let off a blast hike a gun, and a number of small, twittering birds flew out of the end and through the open window into the watery sunlight. â€Å"Good,† said Mr. Ollivander, handing Krum back his wand. â€Å"Which leaves†¦Mr. Potter.† Harry got to his feet and walked past Krum to Mr. Ollivander. He handed over his wand. â€Å"Aaaah, yes,† said Mr. Ohlivander, his pale eyes suddenly gleaming. â€Å"Yes, yes, yes. How well I remember.† Harry could remember too. He could remember it as though it had happened yesterday†¦. Four summers ago, on his eleventh birthday, he had entered Mr. Ollivander's shop with Hagrid to buy a wand. Mr. Ollivander had taken his measurements and then started handing him wands to try. Harry had waved what felt like every wand in the shop, until at last he had found the one that suited him – this one, which was made of holly, eleven inches long, and contained a single feather from the tail of a phoenix. Mr. Ollivander had been very surprised that Harry had been so compatible with this wand. â€Å"Curious,† he had said, â€Å"curious,† and not until Harry asked what was curious had Mr. Olhivander explained that the phoenix feather in Harry's wand had come from the same bird that had supplied the core of Lord Voldemort's. Harry had never shared this piece of information with anybody. He was very fond of his wand, and as far as he was concerned its relation to Voldemort's wand was something it couldn't help – rather as he couldn't help being related to Aunt Petunia. However, he really hoped that Mr. Ollivander wasn't about to tell the room about it. He had a funny feeling Rita Skeeter's Quick-Quotes Quill might just explode with excitement if he did. Mr. Ollivander spent much longer examining Harry's wand than anyone else's. Eventually, however, he made a fountain of wine shoot out of it, and handed it back to Harry, announcing that it was still in perfect condition. â€Å"Thank you all,† said Dumbledore, standing up at the judges' table. â€Å"You may go back to your lessons now – or perhaps it would be quicker just to go down to dinner, as they are about to end -â€Å" Feeling that at last something had gone right today, Harry got up to leave, but the man with the black camera jumped up and cleared his throat. â€Å"Photos, Dumbledore, photos!† cried Bagman excitedly. â€Å"All the judges and champions, what do you think, Rita?† â€Å"Er – yes, let's do those first,† said Rita Skeeter, whose eyes were upon Harry again. â€Å"And then perhaps some individual shots.† The photographs took a long time. Madame Maxime cast everyone else into shadow wherever she stood, and the photographer couldn't stand far enough back to get her into the frame; eventually she had to sit while everyone else stood around her. Karkaroff kept twirling his goatee around his finger to give it an extra curl; Krum, whom Harry would have thought would have been used to this sort of thing, skulked, half-hidden, at the back of the group. The photographer seemed keenest to get Fleur at the front, but Rita Skeeter kept hurrying forward and dragging Harry into greater prominence. Then she insisted on separate shots of all the champions. At last, they were free to go. Harry went down to dinner. Hermione wasn't there – he supposed she was still in the hospital wing having her teeth fixed. He ate alone at the end of the table, then returned to Gryffindor Tower, thinking of all the extra work on Summoning Charms that he had to do. Up in the dormitory, he came across Ron. â€Å"You've had an owl,† said Ron brusquely the moment he walked in. He was pointing at Harry's pillow. The school barn owl was waiting for him there. â€Å"Oh – right,† said Harry. â€Å"And we've got to do our detentions tomorrow night, Snape's dungeon,† said Ron. He then walked straight out of the room, not looking at Harry. For a moment, Harry considered going after him – he wasn't sure whether he wanted to talk to him or hit him, both seemed quite appealing – but the lure of Sirius's answer was too strong. Harry strode over to the barn owl, took the letter off its leg, and unrolled it. Harry – I can't say everything I would like to in a letter, it's too risky in case the owl is intercepted – we need to talk face-to-face. Can you ensure that you are alone by the fire in Gryffindor Tower at one o'clock in the morning on the 22nd ofNovember? I know better than anyone that you can look after yourself and while you're around Dumbledore and Moody I don't think anyone will be able to hurt you. However, someone seems to be having a good try. Entering you in that tournament would have been very risky, especially right under Dumbkdore's nose. Be on the watch, Harry. I still want to hear about anything unusual. Let me know about the 22nd ofNovember as quickly as you can. Sirius

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The Great Atlantic & Pacific Tea Company For decades The Great Atlantic & Pacific Tea Company (A&P) had dominated the US food and grocery market. However, with its size had come increasing managerial inefficiencies and an inability to respond to demands of changing market. A very crucial error was made in the 1950’s when A&P failed to follow customers in their move to suburbs. The result, which plagued the supermarket chain into the 1980’s , was a large number of small and inefficient stores serving declining urban neighbourhoods.In 1971, William J Kane took over as chairman and CEO of A&P. This was a time when company sales had leveled off and profits were declining. In an effort to overcome this slide, Kane ordered the conversion of thousands of regular A&P units to â€Å"WEO† supermarkets, which were described as super –duper discount stores. The average WEO store looked much the same as an old A&P and was about the same size (which was rather small and cramped by industry standards).The big difference between WEO’s and company’s conventional units was lower prices on 90% of the merchandise and a reduction in the variety of production offered from an average of items (SKUs) to as few as 8000. Chairman Kane summed up the company’s philosophy regarding this move as a â€Å"Tonnage recovery Program†, which emphasized volume business. He hope to attract many former customers by employing low prices, unfortunately the food costs began to skyrocket about the same time as WEO was instituted . The pressure caused by the price cuts was too much for the company to bear during this period.Therefore, prices were increased and the resulting market response was influential in causing further deterioration of the food giant. In 1973, the retail chain lost its number one market position to Safeway. Jonathan Scott took over Kane’s position in 1975 recognizing that the retail chain had far too many deteriorating s tores in declining urban neighbourhoods. Scott embarked on an ambitious program to close more than 1200 unprofitable locations. Unfortunately, hindsight revealed that was also needed was an entire withdrawal from certain geographic areas to achieve fficiencies of operations. In an effort market position, Scott responded by introducing the ill-fated â€Å"Price & Pride† advertising program. This advertising campaign focused on telling A&P employees and customers that the company had made a rebound and was concentrating on delivering quality products in attractive stores at low prices. It was a spirit – building campaign. Modern Stores with pleasing wide aisles served as a backdrop to the ads. The Price & Pride Campaign was quite successful in luring customers back to A&P.Unfortunately , shoppers expectation were built on the attractive scenes shown in advertisements, and many were disappointed when they returned because most stores had not really been dramatically chang ed . As a consequence, customers again left in substantial numbers to shop at competing stores. During the mid 1970’s , an ambitious program was undertaken to build many new and modern A&P stores and to remodel others. Regrettably , action fell behind plans. For example, in 1977 when 70 new stores were planned only 46 were opened due to an inability to manage the program.Remodeling also fell far behind schedule. The Price and Pride program was finally abandoned in Jan 1978. Even before this occurred, Scott began to look in earnest for new ways to get the slow moving giant moving heading in the right direction again. Once result was that a new promotional theme was adopted: â€Å"You will do better at A&P†. Along with this , three major steps were taken. First , â€Å"action prices† were instituted to pass manufacturers specials directly on to customers in the form of lower prices. Second , Generic products were offered in many stores.These plainly labeled packag es were placed in â€Å"economy cases† . located in special parts of the store. The result was that for some products customers could choose between national brand, A&P private labels and generics. Third, trading stamps were instituted in many areas. Although some of these measures may have been helpful in slowing the retail chain’s decline , they certainly were not sufficient as a long run turnaround solution. In 1979, the diminishing giant fell to the 3rd position in the supermarket industry and showed signs of serious problems .During that year , the Tengelman group , which owns a large supermarket chain in Germany at the time was able to acquire controlling interests in A&P for an attractive price. James Wood was brought in to replace Scott . One of the first moves of James Wood was to stop closing stores . Instead , a number of units were converted in to â€Å"Plus Store† which were â€Å"limited assortment† unit stocking thousands of essential produ cts far less than the 12000 products found in a general supermarket. The stores were also â€Å"no frill† in design.Goods were kept in their cartons , as opposed to being placed on attractive sheleves , and shoppers had to purchase their own paper bags. The emphasis was on offering bare bone services for low prices. However , perhaps because shoppers could not fulfill all of their shopping needs at Plus Stores, and because prices were not really drastically lower than their competitors , the Plus Stores proved unsuccessful as A&P entered the 1980’s. 1. Does it seem that A&P has tended to favour any particular model or models of buyer behavior? What appears to be the degree of success that has resulted? . Evaluate the relevance of understanding consumer behaviour knowledge to developing a marketing plan for A&P .. 3. What additional information about customers would you as a CEO like to have before designing such a plan ? How might such information be acquired ? 4. Trac e the development of A&P operations from 1979 to present – based on library research. 5. Discuss major concepts from Day 1 seminar discussions you see apparent in this case. 6. What is your personal opinion was the one major flaw in the way A&P went about its effort? Support your argument with reasons.

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Researching the marketing mix Essay Example for Free

Researching the marketing mix Essay In this task, I am going to research the marketing mix and I am going to apply this to The Marketing mix is a general phrase used to describe the different kinds of choices organizations have to make in the whole process of bringing a product or service to market. The 4Ps is the best-known way of defining the marketing mix. The 4ps are: Product- what is sold? Place- where is the product is sold? Price-how much the product costs? Promotion- how a business communicates with its customers Place McDonalds sell various food and drink products all over the world and will need to use methods to get their goods made available to consumers. McDonalds use a distribution channel to get their products from the producer to the consumer. Here are the different distribution channels which exist. This is a direct channel between the producer and the consumer. They will deal together without intermediaries involved. This can be beneficial for businesses because it allows a larger proportion of profit and means they can have more control over the marketing of the product. The disadvantage is that the costs will be larger to distribute the products. Retailers such as farm shops and dell use this channel as they sell the products they make directly to the consumer. This is an indirect channel between customer and producer because of the use of a retailer as an intermediary. The producer will distribute their goods to retailers who will then sell the products individually to consumers. Retailers are focused on consumer markets and offer customers advice, convenience, financial assistance and after-sales support. An example of a retailer which uses this channel would be Next. Next will receive their products from their producer and then sell them in store to the consumers. This is an indirect channel between the producer and consumer because a wholesaler is an intermediary in this channel. The producer will supply the wholesaler with a large number of products and then will break the order into smaller quantities to supply to the consumer. The advantage of this is that the consumer can get the goods at a cheaper price because the transport costs are reduced due fewer journeys. The wholesaler makes its profit by buying the product at a cheaper price and adding a profit margin to the price paid by the retailer. Many small businesses such as cafes use this channel as they will get their products supplied by a wholesaler so they can supply the products to consumers. This is a longer indirect channel. There are two intermediaries in this channel which is a wholesaler and a retailer. The producer will supply large quantities to wholesalers who will then break the orders into smaller ones to send out to the retailer who will sell the product directly to the consumer. The retailer will make a profit by charging the consumers more money per unit than what they paid the wholesaler. An example of a retailer which uses this channel is a newsagent. The producers will send bulk orders to wholesalers. The newsagents will then buy the goods to sell in their store from the wholesaler and then sell the products to consumers in store. Product McDonalds sell fast food and drink products all over the world. McDonalds will need to continue to create customer interest and satisfy their needs by developing new products and releasing them into the market. For example, McDonalds recently released their signature collection which was a new set of meals which created customer interest and demand. I will now apply the marketing mix to the McDonalds and using their most well-known McDonalds product which is the Big Mac to show how it is used. The Marketing Mix and the McDonalds Big Mac Product-The Big Mac McDonald’s most well-known burger. The burger is a low budget product. A Big Mac contains to beef burger patties, cheese, salad and a three-part bun. A Big Mac contains around 490 calories. You can also buy a Big Mac meal which comes with a drink and fries. Meals come in medium or large sizes. It is important that McDonalds have a product like the Big Mac because it gives them a good reputation and image which makes them a successful and well-known brand. Place-The only place a Big Mac can be purchased is at a McDonald’s restaurant. McDonald’s restaurants can be found all over the country, some open 24 hours. There are 1,208 McDonald’s restaurants in the UK and 34,492 worldwide. The benefits of McDonalds selling the Big Mac only at their stores is that they get all the profit from the product, where if they sold their products at other places they would have less profit. Promotion-McDonalds advertise the Big Mac on T.V, radio, the internet and in magazines. McDonalds also offer promotions on the Big Mac such as giving away a free Coca-Cola glass with Big Mac meals and offering the chance to win prizes with the Monopoly stickers. Promotion is important for McDonalds because it gains them more sales which makes them more successful. Price-An individual Big Mac would cost  £2.59 in the UK. A medium Big Mac meal  £4.19 and  £4.59 for a large. The Big Mac costs this much because it is a fast food budget product. It is important that McDonalds sell the Big Mac at the right price because if it is too high people won’t buy the product and if it’s too low they won’t make a profit. The price is successful because it is relatively cheap and McDonalds can make a profit out of it.

The Abolition of Man Cs Lewis Review Essay Example for Free

The Abolition of Man Cs Lewis Review Essay The Abolition of Man was written by C.S. Lewis in 1943. It was subtitled Reflections on education with special reference to the teaching of English in the upper forms of schools†. C.S. Lewis was born in 1898 and died in 1963 (same day as Robert F. Kennedy). He was a fiction and non-fiction writer whose most popular non-fiction work was â€Å"The Chronicles of Narnia†. Lewis was a Classicist who agreed philosophically with Plato and Aristotle and also considered himself a â€Å"Pagan in a World of Apostate Christians†. Lewis was also a friend of JRR Tolkien. The Abolition of Man is listed as #7 on the top 200 greatest works of the 20th Century. In Abolition Lewis writes of two opposing views: The World off the Green Book vs. the World of the Tao. â€Å"Abolition of Man† is a short philosophical work about moral education. In Chapter 1 â€Å"Men Without Chests† the Tao is described as a broad generalization of traditional moralities of the East and West consisting of Buddhist, Hindu, Christian, Confusion, Jewish, Muslim, and Socratic ideologies. The Tao is the sole source of valued judgments and something we cannot change otherwise the Tao would cease to exist. Within the Tao judgments are either right or they are wrong. Within the â€Å"World of the Green Book† all valued judgments and morality are subjective. The green Book itself is really an English textbook used in English upper advance primary schools. The text of the Green book teaches students that sentences containing the predicate of value are not statements about qualities in their subjects but rather unimportant statements about the speakers own feelings. Lewis believed that this philosophy was out of place in an English text book, regardless o f its validity, and proceeds to tear the philosophy apart. The Green book states that objects can merit our approval or disapproval. Lewis describes The Mind of Man in a platonic division of three: Head- the Center of man’s intelligence Stomach- The center of man’s desire Chest- The center of man’s will Lewis argues that removing all sentiments from the mind (as rationalists try to do) produces â€Å"Men Without Chests†. Lewis believes that making valued judgments are an essential part of clear thinking. In Chapter 2, â€Å"The Way†, Lewis hacks away at all other alternative system of values. Lewis goes on to argue that no one can debunk the Tao. To debunk the Tao and have a defensible position against it, one must invoke it. While attempting to debunk the Tao all other systems such as Progressivism, Utilitarianism, and instinct based ethics can be debunked themselves. â€Å"Debunking the Tao debunks itself† Lewis write of other systems. Lewis states that all other systems fall apart among further examination and people who try to debunk the Tao are trying to substitute some other system for it. In Chapter 2 arbitrary goals of other systems are described as necessary, progressive, and efficient. Lewis asks of these systems: Necessary for what? Progressing towards what? Affecting what? What are these goals and why are they desirable? The Tao states that â€Å"certain states of affairs are intrinsically meritorious†. To Lewis, Utilitarianism fails because it is a social ethic and that it lacks personal obligation. Instinct based ethics are our moral values that are derived from animal instincts. Lewis asks â€Å"Do our animal instincts make our morality?† Concerning ethics Lewis tells us that ethics are not something that tell us what we actually do but rather ethics is about telling us what we OUGHT to do, should do, should have done, ought to have done, and OUGHT to be doing. He goes on to say that basing our ethics on instincts does not make sense and that basing ethics on instincts is basing ethics on what people tell us to do. â€Å"People say different things†¦so do our instincts. Our instincts are at war with each other.† There are times in which we should control and suppress our instincts and that there is no one great instinct we should obey. In summation, ethics cannot be derived from our instincts. Chapter two ends with Lewis concluding that the Tao is the sole source of all valued judgment and that nothing is intrinsically evil. All evil is the result of twisting something good and that moral progress is â€Å"timeless, constant, and unchanging.† Lewis referred to chapter one â€Å"Men without Chests† as the present, chapter two â€Å"The Way† as the past, and chapter three â€Å"The Abolition of Man† as the future. The Abolition of man comes in when one tries to exercise the Tao from humanity, because man cannot be man without it. The Tao is a defining characteristic of man, found in no animals, and nowhere else in the universe that we know of. â€Å"To become a race that rejects the Tao is to become something other than human.† I have to admit, â€Å"The Abolition of Man† is one of the hardest reads I’ve ever had. I think if there was some way to modernize it and translate some of what Lewis was talking about it could end up b eing one of the great works of the 21st century. All in all I have probably read this book three times and I’m still a bit confused. My take on it is this; Lewis describes a principle of right and wrong. There is no grey area of the Tao, it is what is intrinsically good in the universe regardless of which philosophy you choose to follow. By trying to discredit what is intrinsically good you are discrediting yourself as any argument that stands against what is all good must contain something that is bad†¦therefore it is wrong to even try. Ethics are not instinctive and instincts themselves, although natural, are not always good just because they are instinctive.

Exchange Rate and Inflation in Pakistan Economy

Exchange Rate and Inflation in Pakistan Economy Inflation exchange rate are two main factors of macro-economics. Inflation is an increase in the level of prices of goods services in an economy by the passage of time. Exchange rate is very important factor in economic which impact imports exports of country. A country does not always want the exchange rate to fluctuate because an exchange rate influences the levels of its imports exports, which are the component of fiscal policy. Policy makers want to hold rate at a particular level or within a certain range in order to achieve given domestic policy goals related to the level of growth of GDP. In the perfect mobility the exchange rate movements and an adjustment of goods market is relative to asset market and consistent expectations. The extends that output responds to a monetary expansion in the short run, this acts as an effect on exchange depreciation which lead to an increase in interest rates (Dornbusch, 1976). There are three types of ways which gives stickiness in prices, the prices set by the firms in that currencies, the firms set the prices for currencies of consumers, or firms set the prices in the currencies of producers (Engel, 2001). When the exchange rates changes, the changes appear in the relative prices and make to generate additional uncertainty for equilibrium in markets. However, there is also defining that the changes in terms of trade play the larger role of changes in the exchange rates which affect the variability of exchange rates (Stockman, 1980). Inflation is one of the key indicators of the country and provides important information on the state of the economy and sound macroeconomic policies that govern it. Inflation is the production of the expenses of manner of things arise which leads to the advancement of the last in the price of meals. For example, if the matter is hardy and this leads to the increment of the price of the production of the costs of increasing, and in turn this leads to increasing prices to keep the crowd his profits. The discretionary nature of the existing monetary policy in Pakistan is inflation, and it is targeting to hit on the Pakistani economy by focusing attention on the monetary policy. So the government of Pakistan is to make monetary policy more transparent for achieving the explicit goal, and decreasing the inflation. Therefore, it is increasing the public understanding of the strategy of central bank to deliver the target, so the State Bank of Pakistan helps to provide an anchor for inflati on expectations in the economy. The State Bank of Pakistan (SBP) has achieving a low rate of inflation in a high priority, and also aims to support the national country objectives of Pakistan to meet the economic diversification and competitiveness in the form of export from the world. 1.2 Problem statement This study is to examine the impact of exchange rate on inflation in Pakistan economy. 1.3 Hypothesis H1: The Exchange rate explains the inflation. 1.4 Outline of the Study The variability of industrial production output higher in the regime of fixed exchange rates instead of regime of flexible exchange rates (Flood Hodrick, 1986). The effect of consumption goods purchases by the government is not the private utility, but per capita real government expenditure are the composite of individual consumption of goods. So notice that the demand of money depends on consumption of goods rather than income and that is the important distinction of closed economies (Obstfeld Rogoff, 1995). Pakistan major import is crude oil which is purchased in dollars. If foreign exchange rate increases, it has increased the cost of oil that has adverse impact on the economy of Pakistan. Inflation is also caused by international loans and the national debt. As nations borrow money, have to deal with the interest that the final prices increase as a way to keep up with debts. The main problem of Pakistan is external debt, which has altered the economic balance. The most immediate effect of inflation is the declining purchasing power of the rupee and its depreciation. This study has been helpful for economic policy makers, foreign investors, economic analysts, business students who are interested in macro-economics studies. This study identifies how two macro-economic factors are related with each other. 1.5 Definitions Variables: For this study the following variables have utilized:- Exchange Rates à ¢Ã¢â€š ¬Ã¢â‚¬Å" Independent Variable: The exchange rates are foreign exchange rate between two currencies. Every country has a foreign exchange market and is one of the largest markets in all countries of the world. It converts 3.2 trillion USD currency conversion. It has two types i.e. fixed and floating exchange rates. Meese and Rogoff (1988), it depends on fundamentals such as money supplies, real incomes, interest rates and inflation. Listen Read phonetically Dictionary View detailed dictionary Inflation à ¢Ã¢â€š ¬Ã¢â‚¬Å" Dependent Variable: Inflation has increased the level of prices of commodity, goods and services in an economy by the passage of time. Price inflation measure is the rate of inflation, the annual percentage change in general price index (usually the Consumer Price Index) over time. Effects of inflation on the economy have manifold and simultaneously positive and negative. Negative effects of inflation include a decrease in the real value of money and other monetary items over time, uncertainty over future inflation which discourages investment and savings, and high inflation leads to shortages of goods if consumers begin hoarding out of concern that prices increase in the future. Positive effects include a development of economic recessions, and debt assistance by reducing the real level of debt. CHAPTER 2: LITERATURE REVIEW The analysis of the monetary determinants of inflation is of obvious interest for the nations that pursue a policy of inflation targeting. This study focuses on Pakistani economy that is currently following an Inflation targeting approach or did so in the recent past. Currency stability plays an important role for the monetary authorities in this economy. Exception of real money growth rule is included in the estimation of Phillips curves for the four economies Bayesian model averaging (McCallum, 1999). Entrepreneurs seek stability in the course says that keeps the price of imported items from growth due to rupee depreciation, which is not only support the economy in general, but also producers who use huge amounts of imported cases in the production of exportable surplus. Since the start of this fiscal year, while the rupee has lost about 2.5 percent of its value beside the dollar and its depreciation rate is unlikely to accelerate in the coming months due to continued inflow of foreign capital and funds. Also include the support of IMF, partial release of the fund, a coalition of U.S., which is part of its payment obligations by the Friends of Democratic Pakistan, extremely strong inflow of return of foreign workers of portfolio investments and possible raise up in exports and foreign direct investment in the third quarter of fiscal year. The current stability of the rupee has helped to contain imported inflation and the weakening of inflationary expectations. Bankers expect that trend continues throughout this financial year, a national unit is depreciated more than 7.0-7.5 percent during the entire fiscal year, against 19.5 percent last year. Businesses verify that the bankers are the forward currency cover in accordance with this expectation. What Pakistan needs today is not a platform to launch an à ¢Ã¢â€š ¬Ã…“economic revival programà ¢Ã¢â€š ¬? but what people need is an actual à ¢Ã¢â€š ¬Ã‹Å"economic revival.à ¢Ã¢â€š ¬Ã¢â€ž ¢ The main problem of Pakistan is the foreign debt which has risen to unmanageable proportions in the last decade and the repayment of which has created turbulence in external balance of Pakistan to such an extent that it does not meet its minimum necessary development requirements. At present Pakistan cannot survive without fresh borrowings from foreign donor agencies. As emphasized by Choudhri and Hakura (2006), an important policy debate for the contemporaneous monetary and exchange rate policy implementations is to reveal the degree to which changes in exchange rates or import prices impact or pass-through into domestic consumer prices. Presently there are three rates of exchange i.e. the bank rate, the inter bank rate and the open market rate. The overall effect on the foreign exchange rates should not be more than 5 to 6 per cent as the increased inflow of foreign exchange have neutralize the effect of the increased demand of private imports. If the foreign exchange earners and remitters keep on getting a fair exchange rate for earnings, it is visualized that in the next few years exports can touch the $15 billion mark and overseas Pakistani remittances can fetch $5 billion. It was concluded that the exchange rate feed shock on domestic inflation, first at the level of prices of the manufacturer and then the level of consumer prices and the im pact of shocks on the variables of price the various stages of the supply is different. The purchasing power parity theory doctrine means different things to different people. There are two versions of this theory that is called the à ¢Ã¢â€š ¬Ã‹Å"absoluteà ¢Ã¢â€š ¬Ã¢â€ž ¢ and the à ¢Ã¢â€š ¬Ã‹Å"relativeà ¢Ã¢â€š ¬Ã¢â€ž ¢ interpretation. The first version of purchasing power theory calculated as a ratio of consumer goods prices for any country that has tended to the equilibrium rates of exchange. In the second version of relative interpretation the rate of exchange rate have been determined between the two countries and quoted with general levels of prices of two countries. This version amend the international trade theory which have been the part of PPP, in which the non-traded goods (services) has been introduced, but the advantage is greater in regards of traded goods than non-traded goods, because of the assumptions of marginal rates of transformation. The correlation among purchasing power parity and exchange rates provides the international comparison of national incomes and living standards (Balassa, 1964). Lawrence (1976) gave another review of this purchasing power parity theory. It has define two applications in economics, the first application use of the conversion factor to transfer the data in one national way to another. The use of PPP is mainly the body of (index number theory) and applications of GDP that have improved over the years and path breaking studies in the area continue to appear. The second application of PPP did not have the widespread acceptance, which has remained the unsophisticated applications. Stockman (1980) develops the model of determination of prices of goods and exchange rates. The changes in commodity prices due to supply and demand affect the change in exchange rates by purchasing power parity deviations.The changes in exchange rates have failed to resemble the changes in prices of goods, because exchange rates more volatile than prices levels and inflation rates. The study proposes the equilibrium of exchange rates behavior and different international goods that have been traded. This relationship cannot exploited by the government, because greater the changes in terms of trade the larger the changes in exchange rates variability. The deviations from PPP persists that variation of exchange rates more than ratios of price indexes. The results found the two interpretation of the relationship between exchange rates and terms of trade. In the first, the causes that affect the changes in exchange rates also affect the change in terms of trade because prices of goods do not adjust to clear the markets. This interpretation also found in the research of Dornbusch (1976), and Isard (1977), the analysis formally differentiates the system with respect to exchange rates and allow prices to change but not the changing in asset stocks. The interpretation presented the elasticity approach of the foreign exchange market and the relation between the trade and exchange rates. Real supply and demand shocks affect prices and the derived demand of exchange rates. These changes in demand for foreign exchange result the supply and demand shocks and that should affect the equilibrium of exchange rates. In second interpretation the expected rate of change of exchange rates revealed on the forward foreign exchange market. This should be related the anticipated change in the terms of trade and the inflation differentials. A persuasive argument about the level of exchange rates is only associated with not causes of the relative prices changes. Bilson (1985) gives the empirical findings about macroeconomic and flexible exchange rate of the U.S dollar related to PPP theory. From the perspective of this research, the sluggish price adjustment in the commodity markets resulted in increased variability in exchange rates. For the demonstration of result it is important because the instability of floating exchange rate is due to the inherent differences between commodity and foreign exchange markets. The determination of the expected future rate is impossible, because it is more difficult to reject the forward parity condition. The major part of the forward parity is the variation in the premium is due to the forecast. The object of this study is to determine that if the forward parity failed is the cause of instability in the same way that the failure of purchasing power parity. The findings develop that currency risk premium is the important factor relative to floating rate system, and movement in the exchange rate are dominate d by the non speculative activity and it has the adverse effect on world economy. Meese and Rogoff (1983) analyzed the outcome of sample forecasting accuracy on various models. The study estimated the horizons of the dollar with different country currencies, like Dutch mark, Japanese yen, and Britain pound that traded to weight the dollar exchange rates. It has also studied the flexible exchange rates with the monetary models of sticky price, so the model of sticky price, which incorporates the current account. The first model is structural models in which it requires to generate the forecasts of exchange rates and explanatory variables. It contains the explanatory power, but it is predicted badly because the explanatory variables are difficult to predict. The second is the univariate time series model in which it identifies a variety of prefiltering techniques involves differencing, de-seasonalizing and removing time trends. The relative performance of these techniques is of interest in itself. The third model use is the random walk model. It is also linked with this univariate time series model. It is used as the predictor of the current spot rate with the entire future spot rate, and it requires no estimation. In this study the performance of estimated univariate time series models or candidate structural model is no good instead it is worst. From a methodological stand point the view that the outcome of sample model fit is an important criterion when evaluating exchange rate, but the estimation of out of sample is failure with time series models that are well approximated the major country exchange rates. Feinberg and Kaplan (1992) evaluated and interact the real exchange rates index expectations is developed and used to explore the role of determination on domestic producer prices. The fact that time path of the exchange rate has directly affected the input costs, and the price of substitutes strongly. To examine the links between both actual and anticipated movements in the dollar and relative domestic producer prices, it chooses to analyze price responses to real exchange rate changes. The effect is dependent on the nature of substitutability between imports and domestic goods. The major finding is that the period of appreciation and depreciation over the past 10 years to inhibit the pass through in to domestic prices. In depreciation the market share to enjoy the continued good times kept prices other than expected. The theory of optimum currency areas, which is usually presented by the other name called flexible exchange rate system, but it is proponent as a device of depreciation that takes place of unemployment when the balance of payment is deficit and appreciation when it replaces inflation when it is surplus. The problem can be exposed and more revealed by defining a currency area within when exchange rates are fixed. Three answers can be given, first certain parts of the world are going through the process of economic integration, so new experience can be made and what constitutes the optimum currency area can be given the meaning of these experiments. Second those countries that have flexible exchange rates are likely to face problems with the theory of optimum currency areas, so these do not coincide the optimum currency areas with the national currency. Third the idea that illustrates the functions of currencies which have been treated in economic literature, and sometimes neglected in the problems of economic policy. In the currency area, countries with different currencies including national country currencies interact pace of employment in deficit, because there is the haveingness to inflation by the surplus countries. The argument for flexible exchange rate system is based on national currencies, and is valid about mobility of factor, so if it is high in the country and low in the foreign countries, the flexible exchange rates system on home country currencies has to work effectively. The concept of optimum currency area has practically applicable only in those areas, where the state has the political organization in the country. The factor mobility is most considered and is more relative rather than absolute concept, with both industrial and geographical factors. It is likely to change the alterations with time over time in conditions, with the conditions of political and economic stability. Money is the convenience that restricts the optimum number of curre ncies, so in terms of this argument the optimum currency area which is composed in number of countries (Mundell, 1961). In another review, the author defines the stabilization of capital mobility policy under the exchange rates which is fixed and flexible in the currencies markets. It concerns the theoretical and practical approach of the increased mobility of capital. Obstfeld and Rogoff (1995) analyses the global macroeconomic dynamics to supply framework based on competition and nominal prices. The effects of macroeconomic policies on output and exchange rates have not been yet persuaded to abandon. The framework which integrated exchange rates dynamics and current account yields is a new perspective, it realize that when prices are sticky the government should spend on shock raises short run output and long run output. The assumption is that home and foreign government purchases the consumption goods that do not directly affect the private utility, but the per capita real government consumption expenditure is a composite consumption of individual goods. It explains that the composite consumption for the services is to balance the opportunity cost and notice that the money depends on consumption rather than income, that distinction is more important in closed economies. The results of this study develop framework that give new foundations about some of the fundamentals problems in international finance. It realizes that the existing Keynesian model is incomplete to offer a satisfactory treatment of exchange rates, output and the current account, but the model which is used in this study is more complex, because it yields simple and intuitive insights of monetary and fiscal policies. It can be extended in a number of dimensions, including non traded goods, market behavior, government spending, and labor market distortions and so on. It goes beyond the essentially statistical approach that handles the current account and exchange rates issues, most importantly this approach allows to analyze the welfare implications of policies. Melvin (1985) has regarded and focused that how the choice of an exchange rate system can affect the stability of the economy. The appropriate nature of the exchange rate system has differed of the disturbance to the economy. It presented the evidence that indicate that the approach is more consistent according to practice by actual country. The other approach is to reach the desirable price stability, in which some mechanism tells the floating rates superiority has become less in the face of monetary shocks. It finds that the flexibility in exchange rates depends not on openness and less important in the mobility of capital, but its positive effects were found for the economic development. The purpose of this study is to consider the determinants of exchange rates system choice, which indicates the theoretical approach with the country choices. The result found that the choice of an exchange rate system has the role of the disturbance to the economy. It suggests that the money shock s are the key of exchange rate system choice in an economy, in which it seeks to minimize the fluctuations in the country price levels. It also suggests that the greater the price shocks the more is a float, so it affects greatly domestic money shocks. Lothian and Taylor (1996) examine the real exchange rate behavior, and explain the variations in sample of stationary univariate equations in real exchange rates. The study investigates the additional insight in the exchange rates behavior that can be gained by considering the floating rate from the perspective of the data. These issues can be best understood on the subject of real exchange rates stability among the currencies of the major developed countries. Some of the pre-float studies support the fairly stable exchange rates in the long run. Subsequently, Dornbusch (1976), and Frenkel (1981), gave largely as the result of studies published, and reject the hypothesis of random walk performance of real exchange rates. The PPP shows the empirical movements in real exchange rates were highly persistent and effective. Although the PPP is reject the hypothesis of non-stationary behavior of exchange rates in long run. The result of this study shows that the longest span of two countrie s exchange rates are significantly mean reverting. The first model result indicates the 80 percent of the variation in the exchange rates of the history data of two countries. By using of another model, the results explaining the performance of remarkably well in the floating, so that this model produce better forecasts of the actual exchange rates. In line with recent studies, it fined that this process of mean reverting is quit slow, with estimated adjustment of data. In the long run the PPP equilibrium is remaining a useful empirical approximation. Gerlach (1988) examine the dynamic interrelationship between innovations in monthly industrial production in a set of economies, specifically this study attempt the output fluctuations that have been correlated during the periods of fixed and flexible exchange rates. The current has to manage exchange rates flexibility that has reduces the interdependence across countries. It should follow the recent article of Flood and Hodrick (1986) in which it is argued that the variability have been higher during a regime of fixed exchange rates instead of flexible exchange rates, but the conclusion of author is striking so sharply. The results of this study of multiple country output movements under fixed and flexible exchange rates are clear. The variances of growth rates should be higher in the flexible exchange rates and in the fixed exchange rates periods. These variances are statistically significant related to the degree of openness and national income. Thirdly the output movements are co rrelated across countries under exchange rate regime, particularly the co movements in output are more important in the business cycle frequently during the recent years of managed exchange rates flexibility. CHAPTER 3: RESEARCH METHODS 3.1 Method of Data Collection The Data of Consumer price index (Inflation) has been collected from federal bureau of statistics while the data of exchange rate has been collected from Pacific Exchange Rate Service, both are the secondary, published source of data. 3.2 Sampling Technique The sampling technique that has been applicable is à ¢Ã¢â€š ¬Ã…“convenience samplingà ¢Ã¢â€š ¬? as it is easily accessible to collect the relevant information from the source and it is inexpensive and hence, gets a gross estimate of the results. (What is The Advantage of Convenience Sampling, 2007-2010). 3.3 Sample size The sample size is selected on the basis of limitations and scope of the research therefore, Last 54 years i.e., 1947 à ¢Ã¢â€š ¬Ã¢â‚¬Å" 2010, data of inflation and exchange rate is decided to be examined. 3.4 Research Model developed From the above defined and explanations of both the dependent i.e. inflation and independent i.e. exchange rates variables and also discussing the effects of exchange rate on inflation and how it have affects on economic of a country. In this study first analysis is the correlation between these two variables, and identifies the significant relationship. Then it analyzes and evaluates the empirical investigation in regression model as a statistical tool. The simple regression model which can be defined in the equation that represented below: Inflation = ÃŽÂ ²Ãƒ Ã‚ ¾ + ÃŽÂ ²(exchange rate) + ÃŽÂ µ Whereas, ÃŽÂ ²Ãƒ Ã‚ ¾ = the intercept of the equation. ÃŽÂ ² (exchange rate) = the changing coefficient of exchange rate. ÃŽÂ µ = the error term of the equation. From the above explained model, the study develop the following estimation and used for the establishment of the model. Therefore, all the compatible data has entered in to SPSS for statistical analysis. 3.5 Statistical Technique The statistical test that has been applied is single linear regression. This is because only one independent variable and one dependent variable to be used in this research. Frankel (1979) defined that most of the recent work on floating exchange rate goes under the name of the monetary or asset view. The exchange rate is moving to equilibrate the international demand for assets, rather than the international demand for the flow of goods. But with the asset view there is à ¢Ã¢â€š ¬Ã‹Å"Chicago Theoryà ¢Ã¢â€š ¬Ã¢â€ž ¢ in which assumes that prices are perfectly flexible. As the consequences when nominal interest rate changes, it has also reflect the changes in expected inflation rate, so as the domestic currency expected to lose value through inflation and depreciation. This is the rise in the exchange rates and gets the positive relationship between positive exchange rate and inflation. CHAPTER 4: RESULTS 4.1 Findings and Interpretation of the result The simple linear regression technique is used to determine the explanation of dependent variable i.e. inflation due to independent variable i.e. exchange rate. The analysis of the result is defined below: Table à ¢Ã¢â€š ¬Ã¢â‚¬Å" 4.1 Model Summary Model R Square Adj. R Square F Sig. 1 .226 .211 15.207 .000 The table à ¢Ã¢â€š ¬Ã¢â‚¬Å" 4.1 shows that the regression model is best fit to predict as F test value is significant. The variation of regression model is explained by 22.6% i.e. the change in inflation is 22.6% by the exchange rate. Table à ¢Ã¢â€š ¬Ã¢â‚¬Å"4.2 Coefficients Model Un-standardized Coefficients Standardized Coefficients T Sig. B Std. Error Beta 1(Constant) Exchange Rate 121.725 .794 6.887 .204 .476 17.673 3.900 .000 .000 Table à ¢Ã¢â€š ¬Ã¢â‚¬Å" 4.2 the coefficients results show that there is the positive affiliation between exchange rates with related to inflation in Pakistan. The results reflect that the exchange rates beta has the positive value and the T-value of both the variables is significant statistically at 0.05. From the above applied regression model, the result concludes in the way that it explains the relationship of both the dependent and independent variables significantly. The Inflation and exchange rates result shows that the beta value of the variable and T-value is significant at the 0.000 level. So the results conclude that the exchange rates value should significantly play its role in the relationship with related to inflation, but the exchange rates should not individually play a significant role in the relationship with inflation. The hypothesis is not rejected and that the exchange rate explains the inflation by 22.6%. The equation of regression model is written below: Inflation = 121.725 + 0.794 (exchange rate) + ÃŽÂ µ 4.3 Hypothesis Assessment Summary Hypothesis R Square F Sig. Regression Coefficient ÃŽÂ ² T Empirical Conclusion Exchange rate explains inflation. .226 15.207 P .794 3.900 Accepted The hypothesis of this study is that exchange rate explains the inflation, which is being accepted and exchange rate is explaining inflation by 22.6%. These findings support to recent theories that suggested the foreign exchange market efficiency with the existence of risk at equilibrium. Wihlborg (1982) examined the relation of interest rates, exchange rate and currency risks in this study. It identifies the test which empirically shows the impact of currency on interest rates and exchange rates. In this study there are three different ways in which the importance of currency risks for interest rate and exchange rate determination. The results presented here that substantiate the changes in the level of currency risk have a non-negligible impact on the changes of exchange rates and on rates of interest of relative between currencies. CHAPTER 5: CONCLUSION, DISCUSSIONS, IMPLICATIONS AND FUTURE RESEARCH 5.1 Conclusion This study is concluded to examine the dependency of exchange rate on inflation by using the data of consumer price index (CPI) as inflation and the data of exchange rate on yearly basis. The result of this study is highly significant so that the hypothesis of this study is not rejected. The result shows that 22.6% variation in inflation is due to the exchange rate in Pakistan. The analysis of this study also shows that if exchange rate becomes zero, the inflation exist to some extent. For example, if one unit of exchange rate increases, the inflation increases only by 0.794 times. 5.2 Discussions This study has applied exchange rate as independent variable and consumer price index (CPI) as dependent variable. For the availability of data, all the data should be available on daily monthly and yearly basis, but the data is used in order to consistent as yearly basis. The regression model has been formulated for these variable relationship investigations. The study developed the hypothesis that the exchange rate explains the inflation in Pakistan, and the findings are supported by the analysis done by Balassa (1964), Meese Rogoff (1983), Frankel (1979), and Mc Callum (1999) etc. 5.3 Implications and The result also accompanies that the exchange rates are the strength of character of foreign exchange market in Pakistan, and it should effect on each of the related variables as an inflationary basis. Therefore the State Bank of Pakistan and Government officials should realize the role of exchange rates in the economy and try to maintain exchange rates to stop or decrease the consumer price index in Pakistan, so that the price range of every thing should be in range of common men. Also Government should addres Exchange Rate and Inflation in Pakistan Economy Exchange Rate and Inflation in Pakistan Economy Inflation exchange rate are two main factors of macro-economics. Inflation is an increase in the level of prices of goods services in an economy by the passage of time. Exchange rate is very important factor in economic which impact imports exports of country. A country does not always want the exchange rate to fluctuate because an exchange rate influences the levels of its imports exports, which are the component of fiscal policy. Policy makers want to hold rate at a particular level or within a certain range in order to achieve given domestic policy goals related to the level of growth of GDP. In the perfect mobility the exchange rate movements and an adjustment of goods market is relative to asset market and consistent expectations. The extends that output responds to a monetary expansion in the short run, this acts as an effect on exchange depreciation which lead to an increase in interest rates (Dornbusch, 1976). There are three types of ways which gives stickiness in prices, the prices set by the firms in that currencies, the firms set the prices for currencies of consumers, or firms set the prices in the currencies of producers (Engel, 2001). When the exchange rates changes, the changes appear in the relative prices and make to generate additional uncertainty for equilibrium in markets. However, there is also defining that the changes in terms of trade play the larger role of changes in the exchange rates which affect the variability of exchange rates (Stockman, 1980). Inflation is one of the key indicators of the country and provides important information on the state of the economy and sound macroeconomic policies that govern it. Inflation is the production of the expenses of manner of things arise which leads to the advancement of the last in the price of meals. For example, if the matter is hardy and this leads to the increment of the price of the production of the costs of increasing, and in turn this leads to increasing prices to keep the crowd his profits. The discretionary nature of the existing monetary policy in Pakistan is inflation, and it is targeting to hit on the Pakistani economy by focusing attention on the monetary policy. So the government of Pakistan is to make monetary policy more transparent for achieving the explicit goal, and decreasing the inflation. Therefore, it is increasing the public understanding of the strategy of central bank to deliver the target, so the State Bank of Pakistan helps to provide an anchor for inflati on expectations in the economy. The State Bank of Pakistan (SBP) has achieving a low rate of inflation in a high priority, and also aims to support the national country objectives of Pakistan to meet the economic diversification and competitiveness in the form of export from the world. 1.2 Problem statement This study is to examine the impact of exchange rate on inflation in Pakistan economy. 1.3 Hypothesis H1: The Exchange rate explains the inflation. 1.4 Outline of the Study The variability of industrial production output higher in the regime of fixed exchange rates instead of regime of flexible exchange rates (Flood Hodrick, 1986). The effect of consumption goods purchases by the government is not the private utility, but per capita real government expenditure are the composite of individual consumption of goods. So notice that the demand of money depends on consumption of goods rather than income and that is the important distinction of closed economies (Obstfeld Rogoff, 1995). Pakistan major import is crude oil which is purchased in dollars. If foreign exchange rate increases, it has increased the cost of oil that has adverse impact on the economy of Pakistan. Inflation is also caused by international loans and the national debt. As nations borrow money, have to deal with the interest that the final prices increase as a way to keep up with debts. The main problem of Pakistan is external debt, which has altered the economic balance. The most immediate effect of inflation is the declining purchasing power of the rupee and its depreciation. This study has been helpful for economic policy makers, foreign investors, economic analysts, business students who are interested in macro-economics studies. This study identifies how two macro-economic factors are related with each other. 1.5 Definitions Variables: For this study the following variables have utilized:- Exchange Rates à ¢Ã¢â€š ¬Ã¢â‚¬Å" Independent Variable: The exchange rates are foreign exchange rate between two currencies. Every country has a foreign exchange market and is one of the largest markets in all countries of the world. It converts 3.2 trillion USD currency conversion. It has two types i.e. fixed and floating exchange rates. Meese and Rogoff (1988), it depends on fundamentals such as money supplies, real incomes, interest rates and inflation. Listen Read phonetically Dictionary View detailed dictionary Inflation à ¢Ã¢â€š ¬Ã¢â‚¬Å" Dependent Variable: Inflation has increased the level of prices of commodity, goods and services in an economy by the passage of time. Price inflation measure is the rate of inflation, the annual percentage change in general price index (usually the Consumer Price Index) over time. Effects of inflation on the economy have manifold and simultaneously positive and negative. Negative effects of inflation include a decrease in the real value of money and other monetary items over time, uncertainty over future inflation which discourages investment and savings, and high inflation leads to shortages of goods if consumers begin hoarding out of concern that prices increase in the future. Positive effects include a development of economic recessions, and debt assistance by reducing the real level of debt. CHAPTER 2: LITERATURE REVIEW The analysis of the monetary determinants of inflation is of obvious interest for the nations that pursue a policy of inflation targeting. This study focuses on Pakistani economy that is currently following an Inflation targeting approach or did so in the recent past. Currency stability plays an important role for the monetary authorities in this economy. Exception of real money growth rule is included in the estimation of Phillips curves for the four economies Bayesian model averaging (McCallum, 1999). Entrepreneurs seek stability in the course says that keeps the price of imported items from growth due to rupee depreciation, which is not only support the economy in general, but also producers who use huge amounts of imported cases in the production of exportable surplus. Since the start of this fiscal year, while the rupee has lost about 2.5 percent of its value beside the dollar and its depreciation rate is unlikely to accelerate in the coming months due to continued inflow of foreign capital and funds. Also include the support of IMF, partial release of the fund, a coalition of U.S., which is part of its payment obligations by the Friends of Democratic Pakistan, extremely strong inflow of return of foreign workers of portfolio investments and possible raise up in exports and foreign direct investment in the third quarter of fiscal year. The current stability of the rupee has helped to contain imported inflation and the weakening of inflationary expectations. Bankers expect that trend continues throughout this financial year, a national unit is depreciated more than 7.0-7.5 percent during the entire fiscal year, against 19.5 percent last year. Businesses verify that the bankers are the forward currency cover in accordance with this expectation. What Pakistan needs today is not a platform to launch an à ¢Ã¢â€š ¬Ã…“economic revival programà ¢Ã¢â€š ¬? but what people need is an actual à ¢Ã¢â€š ¬Ã‹Å"economic revival.à ¢Ã¢â€š ¬Ã¢â€ž ¢ The main problem of Pakistan is the foreign debt which has risen to unmanageable proportions in the last decade and the repayment of which has created turbulence in external balance of Pakistan to such an extent that it does not meet its minimum necessary development requirements. At present Pakistan cannot survive without fresh borrowings from foreign donor agencies. As emphasized by Choudhri and Hakura (2006), an important policy debate for the contemporaneous monetary and exchange rate policy implementations is to reveal the degree to which changes in exchange rates or import prices impact or pass-through into domestic consumer prices. Presently there are three rates of exchange i.e. the bank rate, the inter bank rate and the open market rate. The overall effect on the foreign exchange rates should not be more than 5 to 6 per cent as the increased inflow of foreign exchange have neutralize the effect of the increased demand of private imports. If the foreign exchange earners and remitters keep on getting a fair exchange rate for earnings, it is visualized that in the next few years exports can touch the $15 billion mark and overseas Pakistani remittances can fetch $5 billion. It was concluded that the exchange rate feed shock on domestic inflation, first at the level of prices of the manufacturer and then the level of consumer prices and the im pact of shocks on the variables of price the various stages of the supply is different. The purchasing power parity theory doctrine means different things to different people. There are two versions of this theory that is called the à ¢Ã¢â€š ¬Ã‹Å"absoluteà ¢Ã¢â€š ¬Ã¢â€ž ¢ and the à ¢Ã¢â€š ¬Ã‹Å"relativeà ¢Ã¢â€š ¬Ã¢â€ž ¢ interpretation. The first version of purchasing power theory calculated as a ratio of consumer goods prices for any country that has tended to the equilibrium rates of exchange. In the second version of relative interpretation the rate of exchange rate have been determined between the two countries and quoted with general levels of prices of two countries. This version amend the international trade theory which have been the part of PPP, in which the non-traded goods (services) has been introduced, but the advantage is greater in regards of traded goods than non-traded goods, because of the assumptions of marginal rates of transformation. The correlation among purchasing power parity and exchange rates provides the international comparison of national incomes and living standards (Balassa, 1964). Lawrence (1976) gave another review of this purchasing power parity theory. It has define two applications in economics, the first application use of the conversion factor to transfer the data in one national way to another. The use of PPP is mainly the body of (index number theory) and applications of GDP that have improved over the years and path breaking studies in the area continue to appear. The second application of PPP did not have the widespread acceptance, which has remained the unsophisticated applications. Stockman (1980) develops the model of determination of prices of goods and exchange rates. The changes in commodity prices due to supply and demand affect the change in exchange rates by purchasing power parity deviations.The changes in exchange rates have failed to resemble the changes in prices of goods, because exchange rates more volatile than prices levels and inflation rates. The study proposes the equilibrium of exchange rates behavior and different international goods that have been traded. This relationship cannot exploited by the government, because greater the changes in terms of trade the larger the changes in exchange rates variability. The deviations from PPP persists that variation of exchange rates more than ratios of price indexes. The results found the two interpretation of the relationship between exchange rates and terms of trade. In the first, the causes that affect the changes in exchange rates also affect the change in terms of trade because prices of goods do not adjust to clear the markets. This interpretation also found in the research of Dornbusch (1976), and Isard (1977), the analysis formally differentiates the system with respect to exchange rates and allow prices to change but not the changing in asset stocks. The interpretation presented the elasticity approach of the foreign exchange market and the relation between the trade and exchange rates. Real supply and demand shocks affect prices and the derived demand of exchange rates. These changes in demand for foreign exchange result the supply and demand shocks and that should affect the equilibrium of exchange rates. In second interpretation the expected rate of change of exchange rates revealed on the forward foreign exchange market. This should be related the anticipated change in the terms of trade and the inflation differentials. A persuasive argument about the level of exchange rates is only associated with not causes of the relative prices changes. Bilson (1985) gives the empirical findings about macroeconomic and flexible exchange rate of the U.S dollar related to PPP theory. From the perspective of this research, the sluggish price adjustment in the commodity markets resulted in increased variability in exchange rates. For the demonstration of result it is important because the instability of floating exchange rate is due to the inherent differences between commodity and foreign exchange markets. The determination of the expected future rate is impossible, because it is more difficult to reject the forward parity condition. The major part of the forward parity is the variation in the premium is due to the forecast. The object of this study is to determine that if the forward parity failed is the cause of instability in the same way that the failure of purchasing power parity. The findings develop that currency risk premium is the important factor relative to floating rate system, and movement in the exchange rate are dominate d by the non speculative activity and it has the adverse effect on world economy. Meese and Rogoff (1983) analyzed the outcome of sample forecasting accuracy on various models. The study estimated the horizons of the dollar with different country currencies, like Dutch mark, Japanese yen, and Britain pound that traded to weight the dollar exchange rates. It has also studied the flexible exchange rates with the monetary models of sticky price, so the model of sticky price, which incorporates the current account. The first model is structural models in which it requires to generate the forecasts of exchange rates and explanatory variables. It contains the explanatory power, but it is predicted badly because the explanatory variables are difficult to predict. The second is the univariate time series model in which it identifies a variety of prefiltering techniques involves differencing, de-seasonalizing and removing time trends. The relative performance of these techniques is of interest in itself. The third model use is the random walk model. It is also linked with this univariate time series model. It is used as the predictor of the current spot rate with the entire future spot rate, and it requires no estimation. In this study the performance of estimated univariate time series models or candidate structural model is no good instead it is worst. From a methodological stand point the view that the outcome of sample model fit is an important criterion when evaluating exchange rate, but the estimation of out of sample is failure with time series models that are well approximated the major country exchange rates. Feinberg and Kaplan (1992) evaluated and interact the real exchange rates index expectations is developed and used to explore the role of determination on domestic producer prices. The fact that time path of the exchange rate has directly affected the input costs, and the price of substitutes strongly. To examine the links between both actual and anticipated movements in the dollar and relative domestic producer prices, it chooses to analyze price responses to real exchange rate changes. The effect is dependent on the nature of substitutability between imports and domestic goods. The major finding is that the period of appreciation and depreciation over the past 10 years to inhibit the pass through in to domestic prices. In depreciation the market share to enjoy the continued good times kept prices other than expected. The theory of optimum currency areas, which is usually presented by the other name called flexible exchange rate system, but it is proponent as a device of depreciation that takes place of unemployment when the balance of payment is deficit and appreciation when it replaces inflation when it is surplus. The problem can be exposed and more revealed by defining a currency area within when exchange rates are fixed. Three answers can be given, first certain parts of the world are going through the process of economic integration, so new experience can be made and what constitutes the optimum currency area can be given the meaning of these experiments. Second those countries that have flexible exchange rates are likely to face problems with the theory of optimum currency areas, so these do not coincide the optimum currency areas with the national currency. Third the idea that illustrates the functions of currencies which have been treated in economic literature, and sometimes neglected in the problems of economic policy. In the currency area, countries with different currencies including national country currencies interact pace of employment in deficit, because there is the haveingness to inflation by the surplus countries. The argument for flexible exchange rate system is based on national currencies, and is valid about mobility of factor, so if it is high in the country and low in the foreign countries, the flexible exchange rates system on home country currencies has to work effectively. The concept of optimum currency area has practically applicable only in those areas, where the state has the political organization in the country. The factor mobility is most considered and is more relative rather than absolute concept, with both industrial and geographical factors. It is likely to change the alterations with time over time in conditions, with the conditions of political and economic stability. Money is the convenience that restricts the optimum number of curre ncies, so in terms of this argument the optimum currency area which is composed in number of countries (Mundell, 1961). In another review, the author defines the stabilization of capital mobility policy under the exchange rates which is fixed and flexible in the currencies markets. It concerns the theoretical and practical approach of the increased mobility of capital. Obstfeld and Rogoff (1995) analyses the global macroeconomic dynamics to supply framework based on competition and nominal prices. The effects of macroeconomic policies on output and exchange rates have not been yet persuaded to abandon. The framework which integrated exchange rates dynamics and current account yields is a new perspective, it realize that when prices are sticky the government should spend on shock raises short run output and long run output. The assumption is that home and foreign government purchases the consumption goods that do not directly affect the private utility, but the per capita real government consumption expenditure is a composite consumption of individual goods. It explains that the composite consumption for the services is to balance the opportunity cost and notice that the money depends on consumption rather than income, that distinction is more important in closed economies. The results of this study develop framework that give new foundations about some of the fundamentals problems in international finance. It realizes that the existing Keynesian model is incomplete to offer a satisfactory treatment of exchange rates, output and the current account, but the model which is used in this study is more complex, because it yields simple and intuitive insights of monetary and fiscal policies. It can be extended in a number of dimensions, including non traded goods, market behavior, government spending, and labor market distortions and so on. It goes beyond the essentially statistical approach that handles the current account and exchange rates issues, most importantly this approach allows to analyze the welfare implications of policies. Melvin (1985) has regarded and focused that how the choice of an exchange rate system can affect the stability of the economy. The appropriate nature of the exchange rate system has differed of the disturbance to the economy. It presented the evidence that indicate that the approach is more consistent according to practice by actual country. The other approach is to reach the desirable price stability, in which some mechanism tells the floating rates superiority has become less in the face of monetary shocks. It finds that the flexibility in exchange rates depends not on openness and less important in the mobility of capital, but its positive effects were found for the economic development. The purpose of this study is to consider the determinants of exchange rates system choice, which indicates the theoretical approach with the country choices. The result found that the choice of an exchange rate system has the role of the disturbance to the economy. It suggests that the money shock s are the key of exchange rate system choice in an economy, in which it seeks to minimize the fluctuations in the country price levels. It also suggests that the greater the price shocks the more is a float, so it affects greatly domestic money shocks. Lothian and Taylor (1996) examine the real exchange rate behavior, and explain the variations in sample of stationary univariate equations in real exchange rates. The study investigates the additional insight in the exchange rates behavior that can be gained by considering the floating rate from the perspective of the data. These issues can be best understood on the subject of real exchange rates stability among the currencies of the major developed countries. Some of the pre-float studies support the fairly stable exchange rates in the long run. Subsequently, Dornbusch (1976), and Frenkel (1981), gave largely as the result of studies published, and reject the hypothesis of random walk performance of real exchange rates. The PPP shows the empirical movements in real exchange rates were highly persistent and effective. Although the PPP is reject the hypothesis of non-stationary behavior of exchange rates in long run. The result of this study shows that the longest span of two countrie s exchange rates are significantly mean reverting. The first model result indicates the 80 percent of the variation in the exchange rates of the history data of two countries. By using of another model, the results explaining the performance of remarkably well in the floating, so that this model produce better forecasts of the actual exchange rates. In line with recent studies, it fined that this process of mean reverting is quit slow, with estimated adjustment of data. In the long run the PPP equilibrium is remaining a useful empirical approximation. Gerlach (1988) examine the dynamic interrelationship between innovations in monthly industrial production in a set of economies, specifically this study attempt the output fluctuations that have been correlated during the periods of fixed and flexible exchange rates. The current has to manage exchange rates flexibility that has reduces the interdependence across countries. It should follow the recent article of Flood and Hodrick (1986) in which it is argued that the variability have been higher during a regime of fixed exchange rates instead of flexible exchange rates, but the conclusion of author is striking so sharply. The results of this study of multiple country output movements under fixed and flexible exchange rates are clear. The variances of growth rates should be higher in the flexible exchange rates and in the fixed exchange rates periods. These variances are statistically significant related to the degree of openness and national income. Thirdly the output movements are co rrelated across countries under exchange rate regime, particularly the co movements in output are more important in the business cycle frequently during the recent years of managed exchange rates flexibility. CHAPTER 3: RESEARCH METHODS 3.1 Method of Data Collection The Data of Consumer price index (Inflation) has been collected from federal bureau of statistics while the data of exchange rate has been collected from Pacific Exchange Rate Service, both are the secondary, published source of data. 3.2 Sampling Technique The sampling technique that has been applicable is à ¢Ã¢â€š ¬Ã…“convenience samplingà ¢Ã¢â€š ¬? as it is easily accessible to collect the relevant information from the source and it is inexpensive and hence, gets a gross estimate of the results. (What is The Advantage of Convenience Sampling, 2007-2010). 3.3 Sample size The sample size is selected on the basis of limitations and scope of the research therefore, Last 54 years i.e., 1947 à ¢Ã¢â€š ¬Ã¢â‚¬Å" 2010, data of inflation and exchange rate is decided to be examined. 3.4 Research Model developed From the above defined and explanations of both the dependent i.e. inflation and independent i.e. exchange rates variables and also discussing the effects of exchange rate on inflation and how it have affects on economic of a country. In this study first analysis is the correlation between these two variables, and identifies the significant relationship. Then it analyzes and evaluates the empirical investigation in regression model as a statistical tool. The simple regression model which can be defined in the equation that represented below: Inflation = ÃŽÂ ²Ãƒ Ã‚ ¾ + ÃŽÂ ²(exchange rate) + ÃŽÂ µ Whereas, ÃŽÂ ²Ãƒ Ã‚ ¾ = the intercept of the equation. ÃŽÂ ² (exchange rate) = the changing coefficient of exchange rate. ÃŽÂ µ = the error term of the equation. From the above explained model, the study develop the following estimation and used for the establishment of the model. Therefore, all the compatible data has entered in to SPSS for statistical analysis. 3.5 Statistical Technique The statistical test that has been applied is single linear regression. This is because only one independent variable and one dependent variable to be used in this research. Frankel (1979) defined that most of the recent work on floating exchange rate goes under the name of the monetary or asset view. The exchange rate is moving to equilibrate the international demand for assets, rather than the international demand for the flow of goods. But with the asset view there is à ¢Ã¢â€š ¬Ã‹Å"Chicago Theoryà ¢Ã¢â€š ¬Ã¢â€ž ¢ in which assumes that prices are perfectly flexible. As the consequences when nominal interest rate changes, it has also reflect the changes in expected inflation rate, so as the domestic currency expected to lose value through inflation and depreciation. This is the rise in the exchange rates and gets the positive relationship between positive exchange rate and inflation. CHAPTER 4: RESULTS 4.1 Findings and Interpretation of the result The simple linear regression technique is used to determine the explanation of dependent variable i.e. inflation due to independent variable i.e. exchange rate. The analysis of the result is defined below: Table à ¢Ã¢â€š ¬Ã¢â‚¬Å" 4.1 Model Summary Model R Square Adj. R Square F Sig. 1 .226 .211 15.207 .000 The table à ¢Ã¢â€š ¬Ã¢â‚¬Å" 4.1 shows that the regression model is best fit to predict as F test value is significant. The variation of regression model is explained by 22.6% i.e. the change in inflation is 22.6% by the exchange rate. Table à ¢Ã¢â€š ¬Ã¢â‚¬Å"4.2 Coefficients Model Un-standardized Coefficients Standardized Coefficients T Sig. B Std. Error Beta 1(Constant) Exchange Rate 121.725 .794 6.887 .204 .476 17.673 3.900 .000 .000 Table à ¢Ã¢â€š ¬Ã¢â‚¬Å" 4.2 the coefficients results show that there is the positive affiliation between exchange rates with related to inflation in Pakistan. The results reflect that the exchange rates beta has the positive value and the T-value of both the variables is significant statistically at 0.05. From the above applied regression model, the result concludes in the way that it explains the relationship of both the dependent and independent variables significantly. The Inflation and exchange rates result shows that the beta value of the variable and T-value is significant at the 0.000 level. So the results conclude that the exchange rates value should significantly play its role in the relationship with related to inflation, but the exchange rates should not individually play a significant role in the relationship with inflation. The hypothesis is not rejected and that the exchange rate explains the inflation by 22.6%. The equation of regression model is written below: Inflation = 121.725 + 0.794 (exchange rate) + ÃŽÂ µ 4.3 Hypothesis Assessment Summary Hypothesis R Square F Sig. Regression Coefficient ÃŽÂ ² T Empirical Conclusion Exchange rate explains inflation. .226 15.207 P .794 3.900 Accepted The hypothesis of this study is that exchange rate explains the inflation, which is being accepted and exchange rate is explaining inflation by 22.6%. These findings support to recent theories that suggested the foreign exchange market efficiency with the existence of risk at equilibrium. Wihlborg (1982) examined the relation of interest rates, exchange rate and currency risks in this study. It identifies the test which empirically shows the impact of currency on interest rates and exchange rates. In this study there are three different ways in which the importance of currency risks for interest rate and exchange rate determination. The results presented here that substantiate the changes in the level of currency risk have a non-negligible impact on the changes of exchange rates and on rates of interest of relative between currencies. CHAPTER 5: CONCLUSION, DISCUSSIONS, IMPLICATIONS AND FUTURE RESEARCH 5.1 Conclusion This study is concluded to examine the dependency of exchange rate on inflation by using the data of consumer price index (CPI) as inflation and the data of exchange rate on yearly basis. The result of this study is highly significant so that the hypothesis of this study is not rejected. The result shows that 22.6% variation in inflation is due to the exchange rate in Pakistan. The analysis of this study also shows that if exchange rate becomes zero, the inflation exist to some extent. For example, if one unit of exchange rate increases, the inflation increases only by 0.794 times. 5.2 Discussions This study has applied exchange rate as independent variable and consumer price index (CPI) as dependent variable. For the availability of data, all the data should be available on daily monthly and yearly basis, but the data is used in order to consistent as yearly basis. The regression model has been formulated for these variable relationship investigations. The study developed the hypothesis that the exchange rate explains the inflation in Pakistan, and the findings are supported by the analysis done by Balassa (1964), Meese Rogoff (1983), Frankel (1979), and Mc Callum (1999) etc. 5.3 Implications and The result also accompanies that the exchange rates are the strength of character of foreign exchange market in Pakistan, and it should effect on each of the related variables as an inflationary basis. Therefore the State Bank of Pakistan and Government officials should realize the role of exchange rates in the economy and try to maintain exchange rates to stop or decrease the consumer price index in Pakistan, so that the price range of every thing should be in range of common men. Also Government should addres