Macroeconomic factors affecting Exchange Rate-BRICS Countries

Abstract

This paper basically gives us an empirical study of macro variables factors which affects the foreign exchange or currency market. Exchange rate is an imperative part of a country's economy. The foreign exchange is undergoing substantial changes over the period of time. The research is being directed with a specific end goal to find a connection between macro variables and exchange rate. The direct measure of expectations builds on the information that is contained in data from the foreign exchange market. This research inspects the impact of macro variables on the exchange rate of five different countries i.e. Brazil, Russia, India, China and South Africa. This study uses panel data regression methods to establish a relationship between this variable as well as its impact on currency market. So, here we are taking exchange rate as a dependent variables and independent variables such as GDP, imports, exports, CPI, Industrial Production and Total Reserve. It is significant to highlight that the macroeconomic arrangements must be executed so as to balance out and diminish the trade rates volatilities. Exchange rate also depends upon supply and demand from one country to other countries. For these reasons studying macroeconomic variables their impact on exchange rates are of utmost significance, which also helps to understand what, how and when these variables determine the exchange rates. There are also some other factors which also impact the exchange rate but are not taken into consideration. The research is based upon secondary data which is collected from different sources like World Bank, IMF etc.