Purchasing Power Parity theory follows the concept of one price. A dollar should have same value in every country. If one product is worth one dollar in country 'A', it should be worth same one dollar in country 'B'. And if there are any differences, market forces will adjust those differences by showing their affect on imports/exports.
Net Exports (Exports-Imports) have inverse correlation with the real exchange rate. The lower the exchange rate, the less expensive are domestic goods relative to foreign goods, thus the greater are our net exports.
If your home currency is stronger than the foreign currency, that means foreign goods are cheaper and therefore net exports will decrease. However if local currency is weak, that means domestic goods are cheaper, therefore exports will increase and imports will decrease causing an increase in net exports.
Let us test this theory on the actual data of Pakistan.
As discovered by the above experiment, the theory does have a point.
| Year | Real_Exchange_Rate | Exports | Imports |
| 1980 | 202.12499 | 3232901092.57224 | 6347873098.03869 |
| 1981 | 229.14610 | 3389497117.86622 | 6601897629.02912 |
| 1982 | 209.89335 | 3154729520.61265 | 6721839746.71199 |
| 1983 | 202.73821 | 3662621180.44509 | 6607694675.66819 |
| 1984 | 207.03042 | 3286530740.03267 | 7355744358.94291 |
| 1985 | 193.37273 | 3509101707.26676 | 7090127076.54375 |
| 1986 | 159.58181 | 4035982897.93706 | 7200329462.07479 |
| 1987 | 141.10554 | 4928011006.59509 | 7570955417.21271 |
| 1988 | 136.78800 | 5282184414.62331 | 8623660010.59930 |
| 1989 | 128.15180 | 6005657389.31981 | 9112947789.20635 |
| 1990 | 121.18933 | 6834726234.04086 | 10205366734.07660 |
| 1991 | 118.69088 | 7941736412.83459 | 10997458784.58850 |
| 1992 | 116.62686 | 8472573666.60565 | 12399961066.49240 |
| 1993 | 115.20198 | 8366368531.48480 | 12018661354.09040 |
| 1994 | 114.38995 | 8869455611.72760 | 11884759296.53890 |
| 1995 | 113.64966 | 10213602183.15970 | 14185295078.08500 |
| 1996 | 110.64181 | 10523484820.74010 | 15622529174.60080 |
| 1997 | 112.16187 | 9975895498.67247 | 13408451099.94280 |
| 1998 | 113.73868 | 9155000000.00000 | 11996000000.00000 |
| 1999 | 105.24956 | 8945000000.00000 | 11565000000.00000 |
| 2000 | 103.26181 | 9997000000.00000 | 12026000000.00000 |
| 2001 | 93.83781 | 10471000000.00000 | 11952000000.00000 |
| 2002 | 97.18598 | 12158000000.00000 | 12566000000.00000 |
| 2003 | 94.46481 | 14775000000.00000 | 15210000000.00000 |
| 2004 | 93.78331 | 16027010000.00000 | 22007000000.00000 |
| 2005 | 96.66489 | 19105000000.00000 | 29275200000.00000 |
| 2006 | 99.39681 | 20540000000.00000 | 35098000000.00000 |
| 2007 | 98.14519 | 21946000000.00000 | 37586000000.00000 |
| 2008 | 94.50396 | 25472500000.00000 | 47929000000.00000 |
| 2009 | 95.13067 | 22313000000.00000 | 35151430000.00000 |
| 2010 | 100.00000 | 28056000000.00000 | 40016000000.00000 |
| 2011 | 102.82343 | 31433000000.00000 | 47151000000.00000 |
| 2012 | 104.38923 | 31374000000.00000 | 48902000000.00000 |
| 2013 | 102.30597 | 30043000000.00000 | 49167000000.00000 |
| 2014 | 109.74218 | 30600000000.00000 | 51141000000.00000 |
| 2015 | 119.81198 | 28604000000.00000 | 48622000000.00000 |
| 2016 | 122.51267 | 26813000000.00000 | 51599000000.00000 |
| 2017 | 124.78722 | 28885000000.00000 | 63573000000.00000 |
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