The Impact of Exchange Rate on the GDP
Journal Title: Journal of Science and today’s world - Year 2016, Vol 5, Issue 8
Abstract
The issue of exchange rate volatility and its impact on macroeconomic variables such as gross domestic product (GDP), inflation and capital investment is important for economic planning, since exchange rate is an important factor in economies related to outside world and has a key role in economic policies. This study investigates the effect of exchange rate fluctuations on macroeconomic variables in Islamic countries using a panel data approach. Economic data from Iran, Indonesia, Jordan, Kuwait, Malaysia, Egypt, Morocco, Oman, Saudi Arabia, Senegal, Turkey and United Arab Emirates are used. The present study is based on the theoretical background and experimental literatures of studies like Condyle, Broment and Deynesr (2007) and Osi (2010), in which dependent variables were GDP, foreign direct investment and inflation rate, respectively. Explanatory variables in these equations are volatility and fluctuations of nominal exchange rate and the degree of trade openness. In this study, there were three hypotheses. The results of hypothesis testing were as follows: the first hypothesis stated that exchange rate fluctuations have a negative impact on GDP in Islamic countries. Based on the results of model estimation, this hypothesis is not rejected and therefore increasing volatility and fluctuations of nominal exchange rate leads to lower production levels in Islamic countries.
Authors and Affiliations
Mirnaser Mirbagheri, Saeid EmamAlipour
Keywords
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