The study in hand explores the impact of real exchange rate (RER), inflation and Foreign Direct Investment (FDI) on trade balance in Pakistan. The study uses the secondary data from 1980-2018. The study uses the augmented dickey fuller test for checking the stationarity of the variables and Autoregressive Distributive Lagged (ARDL) Model for exploring the relation among the variables in long run and error correction model for detecting the relation between variables in short time period. The results of ARDL suggest that real exchange rate and FDI significantly and negatively affect the Pakistan’s balance of trade (BOT) and the higher inflation ends up improving the balance of trade. The results of Error Correction Model (ECM) conclude the existence of short run co-integration.

Keyword;  Real Exchange Rate, Inflation, Foreign Direct Investment (FDI), Balance Of Trade