Macroeconomic Impact on the Exchange Rate of SAARC Countries (original) (raw)
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Impacts of Macroeconomic Variables on Foreign Exchange Rate of SAARC Member Countries
Exchange rate (EXR) stability is crucial for especially the developing economies. This study examines the macroeconomic variables which affect EXR in member countries of South Asian Association for Regional Cooperation (SAARC). To do the analyses, data from 1981 to 2019 was relied upon. To estimate the long-run coefficients, Fully Modified Ordinary Least Square (FMOLS) is incorporated. The outcomes of FMOLS exhibit that the variables such as trade, inflation, GDP, total debt services, trade openness, and tariff rate are inversely related to EXR while broad money is found to affect the EXR in positive. As a policy prospect, The Central Bank (CB) is needed to follow tight monetary policy to curtail liquidity of money in economy. It is recommended that CB to discourage government project financing that is to cause increase in money supply but to initiate trendline to facilitate GDP growth, trade, and imposition of tariff to curtail rising EXR.
Determinants of Exchange Rate in Bangladesh: A Case Study
Journal of Economics and Sustainable Development, 2014
The study has been conducted to analyze the determinants of exchange rates in Bangladesh economy for the period of 1990 to 2011 using simple single equation linear regression model (SELRM). Inflation rate, GDP growth rate, interest rate and current account balance is used as explanatory variable. These are the most important determinants of exchange rate, which have major impact on exchange rate. Our conclusion includes that inflation rate, GDP growth rate, interest rate and current account balance has positive impact on exchange rate and the major role played by GDP.
Determinants of Foreign Exchange Rate of Selected Developing Countries: A Conceptual Review
European Journal of Accounting, Auditing and Finance Research
Foreign exchange rate is often seen as an important factor that influences country’s level of productivity, employment rate as well as international trade. Therefore, constant fluctuation in currencies exchange rate has been a major concern in international business operation across countries of the world. This study focused on reviewing the determinants of foreign exchange rate from studies conducted in some developing countries of the world based on literature mapping approach between 1994 to 2020. The study concludes that trade, money supply, trade openness, domestic investment, interest rate differentials, foreign exchange, productivity, inflation, capital inflow, gross domestic production, current account balance, external debt, government spending, oil revenue, nominal exchange rate, price of gold, tariffs, investments, central bank intervention, foreign asset and net export were considered as determinants of foreign exchange rate in some the developing countries of the world.
Factors Influencing Exchange Rate: An Empirical Evidence from Bangladesh
Global Journal of Management and Business, 2019
Literature effect of exchange rate fluctuations is caused by some macroeconomic variables but there have not enough study in this important field. Our purpose was to generalize the main factors behind exchange rate fluctuations of Bangladesh from 1987-2017. We used ADF and PP test for stationary analysis that is unit root test satisfied preconditions for Johansen co-integrating test. Correlation matrix shows the relationships of independent variables with dependent one and agreed with FMOLS test. We find no serial correlation in Q-statistics, LM and Heteroscedasticity test. Johansen co-integration test specifies that there are no co-integrating equations for long run relationship rather the relationship is short run. VAR model and Ganger causality test shows there is a significant effect of Remittance, GDP growth and International trade to Exchange rate fluctuations because R-squared values are more than 60%. Wald test supports the VAR model results by ensuring that there also joint effect of independent variables. Results from FMOLS test concluded that GDP growth and International trade positively affect exchange rate. Remittance has negative effect on exchange rate. Finally, we can say that rise in GDP growth and international trade, increase the exchange rate volatility but rise in Remittance reduces the exchange rate volatility. We found the relevance of this study with existing the literature in its related filed.
In an attempt to measure the intra and international trade competitiveness, we construct the indices of real exchange rate (RER), the conventional measure of competitiveness, for four major South Asian Association of Regional Cooperation (SAARC) nations using annual data for the period of 1960-2000. The objective of the study is to examine the performances of the sampled countries especially after the economic reforms through trade liberalisation that have been taken place under South Asian Preferential Trading Arrangement (SAPTA) and comparing the evolution in Bangladesh, India, Pakistan and Sri Lanka. Our empirical results reveal that in terms of intra regional trade the smaller countries, namely Bangladesh and Sri Lanka reap the higher gains from openness in their trade regime. However, Bangladesh and India gained international competitiveness not until mid 1990s. Movements of Real exchange rates for Pakistan and Sri Lanka indicate that trade liberalisation efforts did not seem to have much positive gain in terms of international trade.
The study has been conducted to analyze the determinants of exchange rates in Bangladesh economy for the period of 1990 to 2011 using simple single equation linear regression model (SELRM). Inflation rate, GDP growth rate, interest rate and current account balance is used as explanatory variable. These are the most important determinants of exchange rate, which have major impact on exchange rate. Our conclusion includes that inflation rate, GDP growth rate, interest rate and current account balance has positive impact on exchange rate and the major role played by GDP.
NICE Research Journal
In the modern world, the exchange rate plays an important role in measuring the strength of country’s economy in global economic conditions. An exchange rate is an important tool for controlling various macro-economic variables, and it is itself affected by different macro-economic variables. Pakistan is a developing country of the world and its unstable economy faces high variability in the exchange rate or devaluation of the domestic currency. Therefore, this study investigates the relationship of an exchange rate with selected macro-economic variables (i.e. import, GDP, Inflation & export), with a special focus on Pakistan’s economy. It also aims at finding out the degree of strength at which selected independent variables to leave a significant impact on the exchange rate in the economy of Pakistan (i.e. during the period of 1992 to 2017). For this secondary database study, data extracted from official website of World Bank, State Bank of Pakistan and Economic Surveys of Pakista...
The exchange rates is a main dynamic of balance of payment. The balance of payment is bookkeeping of all the transactions made in home and foreign. If exchange rate of a home country represents a weaker currency it will have positively effect the on the balance of payment. A stronger home currency will result deficit balance of payment. Imports of Capital goods and export of primary goods i.e. case of developing countries, it will negative effect on balance of payment. This study was conducted to check the relationship among exports, import, capital goods, consumption, manufacturing, oil prices, balance of trade and exchange rate, balance of payment. In the perspective of developing economies of Pakistan, India and Bangladesh. It was found that this relationship was different in above mentioned countries i.e. in case of Bangladesh the predictor and response variable shows the strong positive regression relation while in case of rest of the economies there was different result. Some of predictors shows weaker regression relationship of variables.
Procedia - Social and Behavioral Sciences, 2016
The main purpose of this study is to examine the relationship of exchange rate with exports and imports of major South-Asian and Southeast Asian Economies. The Autoregressive Distributed Lag (ARDL) approach to co-integration and error correction model is employed to investigate the long run and short run relationship between the variables in sample economies over the period of 1979-2010. The results show that the long run relationship between exchange rate and exports exists in more than half of the sample countries; however, the relationship between exchange rate and imports is found only in one sample country. Moreover, the significant short run relationship between the variables is not found in majority of the sample countries.