CEU Electronic Theses and Dissertations, 2024
| Author | Dani, Klarisa |
|---|---|
| Title | Examining the Determinants of Exchange Rate Behavior in Selected Developing Countries: Stability or Collapse? |
| Summary | This research thesis investigated the factors affecting exchange rate stability in developing countries, paying particular attention to key macroeconomic variables such as GDP growth, money supply, inflation, and trade balance. The research used panel data for 17 developing countries selected from less developed transition economies in Europe, Middle Eastern, Latin America and Maghreb from 2011 to 2022, allowing the application of a random effect model to analyze the relationship between these variables and the exchange rate fluctuations. The descriptive statistics suggest that exchange rates, GDP growth, money supply, inflation, and trade balance vary significantly among countries. According to the empirical results, the significant determinants of exchange rate fluctuation are money supply and inflation, whereas GDP growth and trade balance do not play a significant role. In the countries considered, increases in the money supply typically lead to appreciation of the exchange rate in the short run, whereas inflation leads to currency depreciation. Notably, the effects of these variables taper off or reverse after the COVID-19 crisis, further demonstrating the dynamic nature of exchange rate determinants under changing economic conditions. These results were further confirmed by various types of diagnostic tests and the inclusion of a random effects model. The findings isolate the well of necessity for economic policies that are adaptive enough in responsiveness and ensure exchange rate stability in the presence of uncertainty. This provides crucial advice to policymakers in any developing country aiming to achieve greater stability while pursuing economic growth. |
| Supervisor | Horvath, Julius |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2024/dani_klarisa.pdf |
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