—Exchange rates play a significant role in
international trade not only in fixing the prices but also in
determining the nature of hedging to be arranged to avoid
exchange rate risks. In this article we used three countries
yearly exchange rates with their macroeconomic variables such
as relative interest rates etc to study the impact they exert on
exchange rates. We used bootstrapping technique to increase
the sample size to run regression to study the effect. The
previous researchers used general regression models to
establish relationships but we have applied multi models by
linking complementary variables to identify the best model.
Our results showed that model B was robust which indicated all
macroeconomic variables significantly influenced the exchange
rates except employment and budget deficit. Most of the
macroeconomic variables showed opposite sign contrary to the
expectations and we concluded that the psychological factors
like investor confidence dominate over economic variables in
deciding exchange rate fluctuation.
—Bootstrapping, exchange rate, hedging,
inflation rate, interest rate.
The authors are with the Graduate School of Business University Tun
Abdul Razak, Malysia (e-mail: email@example.com,
Cite: Ravindran Ramasamy and Soroush Karimi Abar, "Influence of Macroeconomic Variables on Exchange Rates," Journal of Economics, Business and Management vol. 3, no. 2, pp. 276-281, 2015.