Exchange Rate Fluctuations Research Articles

Forecasting Using the Markov Chain Transition Matrix for Exchange Rate Fluctuations

The current research is preparing an economic statistical study on exchange rate fluctuations for the period from ( 1996 to mid-2005 ) according to the well-known phrase: (The present is the past and the future is the present ). It is a modest attempt to crystallize this type of price in a scientific-statistic method by adopting the matrix of transitional probabilities in Markov chains, as these chains are among the models that are relied upon in the process of forecasting when the data are in the present time and in three cases: - High - Low - Stability. Between the past, the present and the future, the researcher was able to reach in his research to the analysis by applying the method of the greatest places, and to achieve the main purpose of this research, the researcher dealt with four chapters as follows: The first chapter dealt with the problem of research, its importance, need, purpose and determination of its terms. The second chapter reviewed the previous studies published on the subject, as well as the theoretical aspect, in which the matrix of transitional and stable possibilities, the state of stability and independence of the Markov chains, and the estimation of transitional possibilities in the greatest possible way were presented. As for the third chapter, it included the practical aspect and the field application. The data related to the research procedures were collected from the date of (17/10/2003 to 30/6/2005), in which the Iraqi currency was exchanged from the old to the currency currently in circulation, and in which the situation of the Iraqi market suggested great relative stability at the time. Finally, the fourth chapter of this research included the conclusions reached by the researcher from which it came: The market was characterized by a state of stability after the rise in the exchange rate against the dollar, which confirmed the accuracy of the results of the matrix of transitional possibilities, which was reflected on the local stock exchange, as well as the development of recommendations that can be used by the relevant parties.

EXCHANGE RATE DYNAMICS AND THEIR IMPLICATIONS

This research paper explores the dynamics of exchange rate fluctuations and their far-reaching implications for the global economy. Exchange rates are pivotal in shaping trade balances, inflation, and capital flows, making them a critical factor for policymakers, multinational corporations, and investors. By examining both theoretical frameworks and empirical evidence, this study analyzes the effects of exchange rate movements on key economic variables such as inflation rates, gross domestic product (GDP), foreign direct investment (FDI), and international trade balances. The paper employs a combination of econometric modeling and historical data analysis to evaluate how these fluctuations have influenced emerging and developed economies over the past two decades. Results indicate that exchange rate volatility can lead to inflationary pressures in import-dependent economies, disrupt trade balances, and influence FDI inflows. The findings also underscore the importance of stable exchange rate policies to mitigate economic uncertainty. This study concludes with recommendations for future research, particularly regarding the influence of digital currencies and geopolitical tensions on exchange rate stability.

CURRENT EXCHANGE RATES AND MANAGEMENT POLICIES IN VIETNAM

In the age of inflation, the monetary policy management of national central banks has been challenging in stabilizing the economy. The exchange rate is an economic variable that affects most of the aspects of the economy's activities, but the effect of the exchange rate on many activities is very different. In particular, the impact of exchange rates on trading activities is clear and quick. Therefore, the majority of countries use the exchange rate as an effective tool to adjust their import and export activities of goods and services. In Vietnam, although the State Bank of Vietnam (SBV) has managed the exchange rate relatively stable, in the coming time, the exchange rate may continue to be under pressure due to high inflation and political conflicts between countries; there are still no signs of ending… Potential risks affecting investment, production – business activities, and the exchange rate fluctuations in the foreign exchange market. Researching and making practical proposals will help the State Bank apply exchange rate regimes and appropriate exchange rate management mechanisms.

The Impact of Bilateral Currency Swaps on Outward Foreign Direct Investment

The outbreak of the 2008 international financial crisis caused many countries around the world to face exchange rate fluctuations and currency crises. At the same time, China's central bank creatively began to sign central bank currency swap agreements with other countries to stabilize exchange rates and avoid the risk of fluctuations in the US dollar. This article is based on panel data from 90 countries from 2000 to 2021, and uses empirical analysis methods to explore the impact of currency swap agreements on China's outward foreign direct investment. On this basis, the intermediary effect is applied to analyze the financial market mechanism of currency swap policy. Research has found that currency swap agreements have a significant positive impact on the scale of China's outward foreign direct investment (OFDI). Financing constraints are an important influencing mechanism for currency swap agreements to promote China's OFDI. In the context of economic globalization and complex international situations, this study has important reference value for China to further promote deepening cooperation in the financial field between countries and promote the internationalization of the renminbi to facilitate the domestic and international dual circulation.

СТРАТЕГІЧНИЙ АНАЛІЗ ПІДПРИЄМСТВА АГРАРНОГО СЕКТОРУ

With the development of the economy and constant changes in the external environment, it became more difficult for Ukrainian agricultural enterprises to conduct their activities, especially under the influence of two factors, namely the pandemic and the war. The Ukrainian economy, companies and population had not yet recovered from the consequences of COVID-19 when a full-scale invasion began, which forever changed the realities of both the agricultural sector and entrepreneurship. Global climate changes, international trade conditions, technological development and demographic changes were also important external factors, which created new challenges and opportunities for agricultural enterprises. In this context, there is a need to carry out their strategic analysis to determine competitiveness and develop effective development strategies. However, at the moment there is a need for a more detailed study of issues related to the analysis of internal and external factors, their interrelationship and influence on strategic decision-making in the agricultural sector. Thus, the problem that needs to be solved is the development of an integrated methodological approach for the strategic analysis of agricultural enterprises, which would take into account various aspects of their functioning and the impact of changes in the external environment. The article is devoted to a strategic analysis of the agricultural enterprise «Dekoplant». Based on the performed PEST and SWOT analyses, main threats, opportunities, strengths, and weaknesses of both the internal and external environments were identified. Among the identified threats and weaknesses are changes in trade policy conditions, national legislation, currency exchange rate fluctuations (USD and Euro), a weak development strategy, and ineffective marketing platforms. The opportunities and strengths encompass heightened quality and service level demands, high product quality, a diverse range of products, extensive experience, and a large customer base. The article highlights the significance of strategic analysis for efficient enterprise management and gaining competitive advantages. Additionally, top companies in Ukraine's agricultural sector were investigated to determine key industry trends and competitiveness. The analytical approach enables well-founded recommendations for optimizing the strategy of the «Dekoplant» enterprise considering the identified internal and external threats.

Using Short Time Series of Monofractal Synthetic Fluctuations to Estimate the Foreign Exchange Rate: The Case of the US Dollar and the Chilean Peso (USD–CLP)

Short time series are fundamental in the foreign exchange market due to their ability to provide real-time information, allowing traders to react quickly to market movements, thus optimizing profits and mitigating risks. Economic transactions show a strong connection to foreign currencies, making exchange rate prediction challenging. In this study, the exchange rate estimation between the US dollar (USD) and the Chilean peso (CLP) for a short period, from 2 August 2021 to 31 August 2022, is modeled using the nonlinear Schrödinger equation (NLSE) and calculated with the fourth-order Runge–Kutta method, respectively. Additionally, the daily fluctuations of the current exchange rate are characterized using the Hurst exponent, H, and later used to generate short synthetic fluctuations to predict the USD–CLP exchange rate. The results show that the USD–CLP exchange rate can be estimated with an error of less than 5%, while when using short synthetic fluctuations, the exchange rate shows an error of less than 10%.

Effects of the Real Effective Exchange Rate Volatility on the Trade Balance, The Case of Vietnam for Sutainable Development Goals

Objective: The objective of this study is to analyze the impact of exchange rate volatility on the trade balance of Vietnam. Analyzing and evaluating the degree of exchange rate fluctuations of the VND from the first quarter of 2000 to the second quarter of 2019. Then, proposing the orientations and some solutions to regulate the exchange rate to ensure the trade balance surplus in the near future. Method: Exchange rate fluctuation is the conditional variance or unconditional variance or standard deviation of the base rate. Auto Regressive Conditional Heteroskedasticity (ARCH) model was used to calculate real effective exchange rate fluctuations in VND. The study also uses Ordinary Least Square regression (OLS) method to evaluate the impact of exchange rate volatility on Vietnam's trade balance. Results and Discussion: The results show that a stable long-term equilibrium relationship exists between exports. Quantitative results show that exchange rate volatility have a positive impact on exports but have not yet shown a clear impact on Vietnam's imports. The paper also points out that in addition to the exchange rate fluctuations, many other factors such as foreign income, domestic income, trade conditions ... could also affect the trade balance. Research Implications: To achieve the trade balance surplus, the proposed solutions need coordination among ministries and agencies. Finally, the flexible control of State Bank on exchange rate volatility will enhance Trade Balance of Vietnam.

Exchange Rate Pass-Through into Import Prices: Evidence from Türkiye during 2010-2020 Period

This article analyses pass through of exchange rates into the import prices for an emerging economy, Türkiye, which faced severe fluctuations in the nominal exchange rate in the recent years, and experienced significant increases in domestic prices. The Turkish economy continues to struggle due to high inflationary pressures and a steep Turkish Lira (TL) devaluation particularly after 2017. This study aimed at examining the relationship between exchange rate and import prices using quarterly data for the period of 2010q1-2019q1, while the empirical methodology is framed in the multivariate cointegration analysis, along with the application of the Johansen cointegration test and the development of an autoregressive error correction vector for the determination of the pass-through in the long term. Our findings show that 85.6% of the fluctuations of the nominal exchange rate are transmitted to the import prices in the mentioned period, slower than the findings of the study by Akgunduz and his colleagues as the difference of import prices from its long-run relationship implied by the real exchange rate is likely dominated by energy prices in a strong manner. Second significant finding derives from the parameter that measures the speed of the pass-through, whose estimate has been found as -0.0125, inferring that the adjustment in short-term imbalances between import prices and the nominal exchange rate through changes in import prices is rather slow.

Impact of Exchange Rate Fluctuations on Money Velocity in the Egyptian Economy

Impact of Exchange Rate Fluctuations on Money Velocity in the Egyptian Economy

Cyclinaclity Effects of Exchange Rates and Oil Prices

Understanding the concept of time scales is crucial when modeling economic and financial decisions. Within the time-frequency domain, this study delves into the relationship between fluctuations in oil prices and exchange rates across major oil-importing and exporting countries. The investigation employs various cross-wavelet techniques within the continuous wavelet transform framework, with a particular focus on wavelet coherence and phase-difference over the period 2000 to 2020. The results underscore a notable diversity in the connection between the oscillations of oil prices and exchange rates across diverse countries. This relationship is subject to temporal variations and is contingent upon the specific time horizon under consideration. In particular, our analysis reveals strong co-movements between oil prices and exchange rates across various time intervals and frequencies. Importing oil countries like New Zealand, Singapore, Brazil, and Taiwan exhibit particularly pronounced co-movements. Similarly, exporting oil countries such as Kuwait, Mexico, Russia, and Canada also display strong associations between oil prices and exchange rates. These correlations are intricately tied to key macroeconomic events, further highlighting the complex interplay between oil prices and exchange rate movements in different global regions. While a robust connection is evident in numerous countries, the strength of the relationship appears significantly weaker in several others. This variance underscores the nuanced nature of the association between the fluctuations in oil prices and exchange rates across the global landscape.

Küreselleşme sonrası Türkiye’de dış ticaret açığının reel efektif döviz kuru ve dış ticaret hadleriyle modellenmesi: NARDL yaklaşımı

Fluctuations in the real effective exchange rate and changes in the terms of trade can cause predictable or unpredictable changes in the overall economy. The most important consequences of these fluctuations and changes are the effects of regional or global economic crises on macroeconomic variables (employment, unemployment, inflation, GDP, balance of payments, foreign trade deficit). Anticipating the consequences of the dynamic effects of these changes is crucial for policymakers. This study analyzes the effects of changes in CPI-based real effective exchange rates and terms of trade on the trade deficit in 1994-2022. Since the impact of CPI-based real effective exchange rate and terms of trade changes on the trade deficit is likely to be asymmetric, the Nonlinear Auto Regressive Distributed Lag (NARDL) method is used in this study, and it is concluded that the factor that affects the trade deficit the most is the decline in the terms of trade. One of the most important reasons why the foreign trade deficit does not decrease at the desired level, even in periods of depreciation of the TL, is the decline in the country’s terms of trade.

The Correlation Dynamics Between Sensex 30 Returns and INR/USD Exchange Rate Movements

The Sensex 30 is a benchmark index for India's largest companies, indicating the health of the stock market. Its movements are influenced by domestic economic conditions, corporate performance, and global trends. The INR/USD exchange rate, which represents the Indian rupee vs. the US dollar, is crucial for India's international trade and investment. A depreciating rupee benefits export-oriented companies but increases import costs, affecting market performance. Understanding this dynamic is essential for investors and policymakers. The fluctuating link between the INR/USD currency pair and SENSEX 30 stock index is examined in this study from 2014 to 2024, with an emphasis on how changes in the exchange rate affect stock market performance. As India continues to integrate into the global economy, the interaction between foreign investments and the Indian stock market has become increasingly relevant for understanding investor sentiment and economic stability. This study particularly examines how returns from the SENSEX 30, an index that monitors 30 of India's biggest and most traded firms, are impacted by changes in the INR/USD exchange rate. The research's main finding is that there is a strong positive correlation between the INR/USD exchange rate and the SENSEX 30 index, with a rise of 1 in the SENSEX 30 for every 0.90 increase in the exchange rate. This implies that the depreciation of the Indian currency (INR) in relation to the US Dollar (USD) may result in increased stock market returns, especially in industries that rely heavily on exports, as Indian goods become more competitive in international markets due to the weaker currency. On the other hand, persistent depreciation may also result in higher import prices and inflationary pressures, which might be detrimental to business profitability and the state of the economy as a whole. Given that currency changes may have an impact on their investment decisions, foreign institutional investors (FIIs) are essential to this dynamic.. Decreased international gains are eroded by a lower INR, which frequently leads to portfolio modifications and more market volatility. Exchange rate fluctuations and stock market performance are influenced by the participation of foreign institutional investors (FIIs) and the Reserve Bank of India's (RBI) monetary policy choices. For example, the RBI's changes to interest rates have an effect on investor mood and influence market movements. Global economic variables that affect the US stock market and exchange rate include geopolitical tensions, changes in the price of commodities, particularly oil, and US Federal Reserve policies. The study uses a variety of statistical techniques, including as trend analysis, a t-test, and correlation analysis, to assess the link between the performance of the SENSEX 30 and the INR/USD exchange rate during a ten-year period. The results of the t-test demonstrate that the difference between the mean values of the SENSEX 30 and the INR/USD exchange rate is statistically significant, with a t-statistic of 30.278 and very tiny p-values. The SENSEX 30 exhibits a significantly bigger variation than the INR/USD, suggesting that the stock market is more volatile than the currency rate. This result is in line with predictions because stock markets are often more erratic than exchange rates. As a result, the study emphasizes how much exchange rate fluctuations affect the Indian stock market. It is recommended that investors keep a careful eye on currency changes since they have the International Journal of Scientific Research in Engineering and Management (IJSREM) Volume: 08 Issue: 09 | Sept - 2024 SJIF Rating: 8.448 ISSN: 2582-3930 © 2024, IJSREM | www.ijsrem.com DOI: 10.55041/IJSREM37610 | Page 2 potential to impact business profitability and stock market performance, particularly in industries that depend on imports or exports. The results also emphasize how crucial it is to diversify portfolios and hedge against risk related to currencies in order to successfully manage the intricate relationships between monetary policy, market volatility, and global economic situations.

Beyond GARCH: Intraday Insights Into the Exchange Rate and Stock PriceVolatility Dynamics in Borsa Istanbul Sectors

This study investigated the impact of exchange rate volatility on sectoral stockvolatility by employing the intraday volatility measure directly calculated fromthe original data, using daily data from 27 Borsa Istanbul sectors between April 29, 2003, and April 25, 2023. In the literature, GARCH models are commonly usedtostudy the volatility spillovers between exchange rates and stock prices, typicallyusing aggregate data. However, the GARCH family models provide inefficient andbiased estimates if they are misspecified. Moreover, using aggregate-level data maylead to biased and misleading conclusions. The research used intraday volatilitymeasures to overcome the shortcomings of GARCH models. The ordinary least squares (OLS), GARCH (1,1) methods, and Garman and Klass (1980) volatilityestimator are used. The empirical results showed that the estimates fromeachmethod vary significantly, and these disparities in the results might be due tomisspecification in GARCH (1,1) models. The intraday volatility model estimationresults showed that although stock price volatilities in all sectors are positively andsignificantly affected by exchange rate volatility, their magnitudes varysignificantly. Taken together, this implies the presence of vast heterogeneities inthe responses of sectoral stock price volatilities to exchange rate volatility. The results encourage policymakers to pay special attention to these heterogeneities toprevent capital flights and underinvestment. Additionally, the findings assist investors in making more effective decisions by helping themadapt their investment strategies to factor in exchange rate fluctuations and mitigate the impact of unexpected events in the exchange rate market

Exchange rate flexibilization and macroeconomic determinants: Evidence from MENA region

Many emerging economies have significantly changed their economic policies by adopting floating exchange rate regimes. This article aims to investigate the relationship between exchange rate variations and key macroeconomic indicators in the MENA region, focusing specifically on Egypt, Tunisia, and Turkey. The study employs regression analysis to explore how macroeconomic factors such as inflation, interest rates, trade balances, foreign exchange reserves, etc. influence exchange rate movements in these economies. By conducting a comprehensive regression model, we aim to provide insights into the complex dynamics of exchange rate fluctuations and their implications for economic stability and policymaking in the MENA region.

Managing Currency Risk in Global Supply Chains: Resilience Strategies

Currency risk was a significant difficulty for firms involved in international commerce in the current global economy. The profitability and competitiveness of organisations with supply chains that span across borders were greatly affected by fluctuations in exchange rates. This introduction examined the intricacies of managing currency risk in global supply chains, investigating the most recent solutions used by organisations to strengthen their operations. Over the last 10 years, there has been an extraordinary increase in globalisation, characterised by more market integration and increased international trade. Nevertheless, globalisation brings with it not just benefits but also inherent concerns, with currency volatility being the most prominent among them. According to projections by Grand View Research, Inc., the global currency exchange market was expected to reach a value of $28.8 trillion by 2025. This highlights the significant currency risk that firms throughout the globe were facing. The emergence of the COVID-19 pandemic emphasised the need to effectively handle currency risk in worldwide supply networks. Amidst trade interruptions and shifting currency rates, economies faced increased uncertainty and volatility, which in turn affected enterprises. Research conducted by the Foreign Monetary Fund had shown that there was a significant increase of 59% in currency volatility during the early phase of the epidemic. This has worsened the difficulties faced by companies that heavily depend on foreign commerce. In light of this situation, companies were obligated to reevaluate their methods for managing currency risk to strengthen their ability to withstand challenges and reduce the possibility of financial losses. Conventional methods such as forward contracts and currency options, while somewhat successful, may not be enough to handle the intricacies of contemporary supply chains. As a result, organisations are using novel methods and technology to effectively manage currency risk. Recent developments in Financial Technology have created new opportunities for innovative currency risk management strategies. Blockchain technology had the potential to provide transparent and secure cross-border transactions, which helped decrease the risk of currency exposure. Moreover, the advent of Artificial Intelligence and Machine Learning algorithms enabled organisations to analyse extensive information and forecast currency fluctuations with enhanced precision. Collaborative alliances within supply chains provided a strategic opportunity to reduce currency risk. Companies may enhance risk mitigation and improve their ability to adapt to market dynamics by developing stronger connections with suppliers and consumers. This can be achieved via the exploration of collaborative hedging methods and the sharing of risk burdens. Nevertheless, effectively managing currency risk in international supply chains requires the ability to quickly adapt, come up with new ideas, and work together. This summary summarised important findings from the following conversation, emphasising the need for proactive risk management techniques in protecting against the uncertainties of the global economy. Keywords: Currency risk management, Global supply chains, Exchange rate volatility, International commerce, Financial technology (Fintech).

Vietnam's exports to Korea and the real exchange rate: Post-crisis evidence from the multiple threshold nonlinear autoregressive distributed lag model

In this study, the asymmetric effects of the real exchange rate on Vietnam's exports to Korea were investigated using the multiple threshold nonlinear autoregressive distributed lag (MTNARDL) model. As a result, the MTNARDL model exhibited enhanced estimation accuracy compared to the single-threshold nonlinear autoregressive distributed lag (NARDL) model. Furthermore, the aggregate bias problem was solved using individual export data for 16 major industries instead of relying on the overall export value data. The results revealed the substantial asymmetric impact of real exchange rate fluctuations in the short and long run. Fluctuations in the real exchange rate boosted Vietnam's exports to the Republic of Korea in the long run, with minimal negative influence. This indicates that the depreciation of the Vietnamese dong against the United States (US) dollar encouraged exports in some industries but limited exports in others. However, the short-term effect of the real exchange rate remains uncertain, as it could be either negative or positive depending on the industry and threshold level. The diverse impacts of the real exchange rate fluctuations on exports across industries were attributed to factors such as the capacity to absorb foreign exchange risks, product heterogeneity, and the ease of adjusting inputs and production for each sector. Therefore, these findings may help policymakers develop Vietnam-specific policies to address long- and short-term changes in the threshold levels of real exchange rate fluctuations.

Asymmetry and non-linearity in exchange rate pass-through: Evidence from scanner data

Using retail scanner data from Kazakhstan, an emerging economy with significant and unexpected exchange rate fluctuations, we observe an incomplete yet substantial exchange rate pass-through (ERPT) into prices. Specifically, we note a 50% change occurring a year after the initial shock. The ERPT demonstrates asymmetry in response to exchange rate movements. Notably, the direction of this asymmetry is opposite for imported versus domestic products. Furthermore, our findings indicate that ERPT is non-linear; the price response is more pronounced when the exchange shock is small, aligning with the existence of menu costs. Understanding these asymmetric and non-linear price responses to exchange rate shocks may be crucial for formulating effective inflation targeting policies, especially in emerging economies prone to high inflation.

Effect of exchange rate volatility on financial reporting of consumer goods firms in Nigeria (2019 – 2023)

This study examines the effect of exchange rate volatility (ERV) on financial reporting of consumer goods firms in Nigeria. Ex-post facto research design was adopted for this study. Data were sourced from the published annual reports of fourteen consumer goods firms listed on the Nigeria Exchange (NGX) and the Central Bank of Nigeria (CBN) Statistical Bulletin for the period 2019-2023. The analysis employed the Panel Error Correction-Generated Least Squares (EGLS) method, focusing on three key financial metrics: Earnings Per Share (EPS), Current Ratio, and Debt-to-Equity Ratio. The findings reveal that ERV has a significant positive effect on EPS. Conversely, a significant negative effect is observed on the current ratio. However, the effect on the debt-to-equity ratio is found to be insignificant, suggesting that ERV does not substantially influence capital structure decisions. The study recommends that firms should continue to develop and implement robust strategies to manage the impacts of ERV, such as hedging, strategic pricing, and cost control measures, to safeguard and potentially enhance their financial performance during periods of exchange rate fluctuations. Keywords: Exchange Rate Volatility, Financial Reporting, Earnings Per Share, Current Ratio, Debt-to-Equity Ratio, Consumer Goods Firms.

Exchange Rate Pass-Through to Provincial Consumer Prices: A Geographical-Goods Level Analysis

This study investigates exchange rate pass-through (ERPT) to provincial consumer prices in Canada from a geographical and goods-specific perspective. ERPT refers to the extent in which changes in the exchange rate influence domestic price movements. For example, a depreciation of the Canadian dollar relative to the U.S. dollar may increase the price of imports into Canada from the U.S., thereby raising consumer prices in Canada. Using extensive datasets from 2000 to 2023, this research quantifies the magnitude and speed of ERPT across various provinces and consumer price index (CPI) categories. The methodology employs a regression model framework, building upon the approach of Savoie-Chabot and Khan (2015) to estimate the impact of short-run and long-run exchange rate fluctuations on consumer prices. The findings highlight significant regional and categorical variation in ERPT. For example, Alberta exhibits the highest short-run ERPT for energy consumer prices where a 1% increase in the exchange rate leads to a 0.60% increase in prices. In contrast, Quebec exhibits the lowest short-run ERPT for energy consumer prices where a 1% increase in the exchange rate leads to only a 0.18% increase in prices. Price responses in each of these provinces differs from the short-run ERPT of Canada which is 0.32%. Furthermore, energy prices exhibit the highest sensitivity to exchange rate fluctuations, while most often categories excluding energy show minimal impact. These results emphasize the importance of region-specific economic policies to address distinct provincial price responses to exchange rate fluctuations. This study offers valuable insights for policymakers to develop strategies that mitigate any adverse economic effects of exchange rate changes and promote regional economic stability and growth.

The Economic Factors Influencing Exchange Rate of Kip (LAK) against Yuan (CNY)

This research aimed to investigate the economic factors that influence the exchange rate of LAK against the CNY. The researchers used the quarterly data from the database of the Bank of Lao. PDR and Bank of Chaina in the period of 2015-2020 (24 quarters) by testing the economic factors influencing the exchange rate of LAK against CNY in the long-term period by applying the Engle and Grenger method and the short-term period through the Error Correction Model. The results found that the fluctuation in exchange rate of LAK against CNY in long-term was positively influenced by the economic factors, which consisted of 4 factors as: 1) the change of money supply differential, which LAK appreciated against CNY, 2) the change of inter-bank rate differential, which LAK depreciated against CNY 3) the change of export differential, which LAK appreciated against CNY and 4) the change of comparative consumer price index differential, which LAK depreciated against CNY. The results of the fluctuation in exchange rate of LAK against CNY in short-term was positively influenced by the economic factors, which consisted of 3 factors as: 1) the change of money supply differential, which LAK appreciated against CNY; 2) the change of inter-bank rate differential, which LAK depreciated against CNY and 3) the change of export differential, which LAK appreciated against CNY.