Analysis of Macroeconomic Determinants of Exchange Rate Volatility in India
Exchange rate is known as the one of the crucial element for the development of the economy, it is seen that volatility has significant influence on the international trade. In this paper analyzed that impact of inflation rate and money supply on the volatility of exchange rate of India. We collected the monthly data to estimate the short and long run relationship between these variables. For this purpose, we have applied the Johansen Cointegration, VECM, GCT and IRF for analysis the response of different shocks on the variables. This paper is showing that high money supply and interest rate increase the inflation rate, which leads to increase the volatility in exchange rate on India.
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