Impacts of Macroeconomic Variables on Foreign Exchange Rate of SAARC Member Countries

Authors

  • Khawaja Asif Mehmood School of Economics, Bahauddin Zakariya University Multan, Pakistan
  • Muhammad Nadir School of Economics Bahauddin Zakariya University Multan
  • Muhammad Aurmaghan School of Economics Bahauddin Zakariya University Multan

DOI:

https://doi.org/10.56536/e7fj1473

Keywords:

Exchange Rate, Inflation, Money Supply, Debt Servicing, GDP Growth Rate, FMOLS, SAARC

Abstract

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 trend line to facilitate GDP growth, trade, and imposition of tariff to curtail rising EXR.

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Published

14-12-2023

How to Cite

Impacts of Macroeconomic Variables on Foreign Exchange Rate of SAARC Member Countries. (2023). International Journal of Management Research and Emerging Sciences, 13(4). https://doi.org/10.56536/e7fj1473

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