The Effect of Interest Rate Changes on Exchange Rate in Egypt (An Applied Study)

Abstract

This study aims to measure the impact of interest rate on deposits on exchange rate and measure the effect of interest rate on loans on exchange rate. The first hypothesis states that interest rate on deposits don’t effect on exchange rate. The second hypothesis states interest rate on loans don’t effect on exchange rate, The researcher will be relying on a combination of inductive and deductive approaches to carry out two types of study are as follows: An Analytical study through the analysis of books, periodicals, theses related to interest rate and exchange rate. An applied study, The study period has been applied on monthly weighted average interest rate on loans and deposits and monthly weighted average exchange rate in Egypt for the period from January 1, 2021, till march 31, 2022) relying on the Excel program to prepare data. The results of the statistical study to test the first hypothesis show that: a weak positive relationship between the independent variable (Weighted Average Interest Rates deposits) and the dependent variable (exchange rate). The higher Interest Rates deposits, the higher the value of exchange rate. The results of the statistical study to test the second hypothesis show that: a positive relationship between the independent variable (Interest Rates on loans) and the dependent variable (exchange rate).The higher Interest Rates on loans, the higher the value of exchange rate. KeyWords: Interest rate on deposits, Interest rate on loans, Exchange Rate