The essence of this study is to empirically examine the impact of exchange rate variation and inflation on the economic growth of nigeria ordinary least square method was adopted to analyze the time series properties of the variables under consideration so as to determine the trend of the variations using annual data set on real gdp and inflation rate spanning from 1980-2010. Proportion of inflation and output variance can be explained by the exchange rate the results of the study suggest that exchange rate had significant impact on inflation in all the member states. Stabilise the exchange rate, and inflation in albania3 they also help to quantify the extent to which shocks to money supply can explain the variance in inflation after mid-2000, when monetary policy shifted from direct to indirect instruments.
Rate and rate of inflation have negative impact on empirical evidence showed that real exchange rate variations examined the impact of exchange rate. The interest rate variations were measured by three years moving average of standard deviation of the nominal exchange rate 32 model specification the empirical analysis of the impact of. 118 the dynamics of money supply, exchange rate and inflation in nigeria 1 introduction nigeria's weak economic base became problematic from the early 1980's.
The rate of inflation in a country can have a major impact on the value of the country's currency and the rates of foreign exchange it has with the currencies of other nations however, inflation. A higher inflation rate in the uk compared to other countries will tend to reduce the value of pound because: high inflation in the uk means that uk goods increase in price quicker than european goods therefore uk goods become less competitive demand for uk exports will fall, and therefore there. Theories of exchange rate determination 822 words | 4 pages economic literature on the relationship between interest rates and exchange rates in full, it will be useful to briefly discuss some of the important theories of exchange rate determination.
Most of the period (1986-1995), inflation rate was increasing as exchange rate was increasing in absolute values from this observed relationship, it is clear that this kind of variation in exchange rate affects the rate of. However, the relationship between changes in the exchange rates and inflation rates is almost nonexistent during the 1970s and the late 1980s and 1990s this figure shows the changes in the rupiah-dollar exchange rate and inflation rates in indonesia during the post-asian crisis period. Volume, price and exchange variance analysis in ifp provides estimates of the contributions to variances between actual and base sales values of volume, price and exchange rate differences this analysis is in terms of the selected analysis currency. The inflation rate in argentina was recorded at 3440 percent in august of 2018 inflation rate in argentina averaged 19881 percent from 1944 until 2018, reaching an all time high of 2026280 percent in march of 1990 and a record low of -7 percent in february of 1954. Inflation rate (cpi, annual variation in %) inflation refers to an overall increase in the consumer price index (cpi), which is a weighted average of prices for different goods the set of goods that make up the index depends on which are considered representative of a common consumption basket.
Unlike interest rate and inflation, the effect interest rates have on exchange rates are positive as interest rates rise, the exchange rate falls, and vice versa when interest rate in a country rises it causes it creates a higher demand for the currency of that country. Consequently, variation in inflation also changes the spot and forward exchange rate while it depends upon direction of the inflation of one country to other country in addition, it is observed positive change in exchange rate if direction of inflation in two countries is same but domestic inflation remains low as compare to other country. Inflation targeting is a monetary policy regime in which a central bank has an explicit target inflation rate for the medium term and announces this inflation target to the public. Variations in the real exchange rate are caused by changes in t he nominal exchange rate this is probably a good approximation, at least in a shor t‐term perspective.
On the other hand, inflation rate, exchange rate, oil revenue, government spending and money supply are cointegrated this revealed a strong relationship among the variables though inflation rate and exchange rate show no long term relationship, but short term relationship seems to exist between them 1 acknowledgements we would like to express our gratitude to all those who gave us the. As the chinese economy becomes more open and the authorities scrapped the peg to the us dollar in july 2005, exchange rate movements start to influence the price inflation in china in a significant way. 8 key factors that affect foreign exchange rates foreign exchange rate (forex rate) is one of the most important means through which a country's relative level of economic health is determined a country's foreign exchange rate provides a window to its economic stability, which is why it is constantly watched and analyzed.
Inflation and exchange rate in the last 38 years by evaluating the relationship between government expenditure, money supply, oil revenue, exchange rate and inflation as the dependent variables. Effect of exchange rate variation and inflation on the economic growth of nigeria the data sources were mainly from a twenty three year financial indications of exchange rate variations and inflation.