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The Effect of Exchange Rate Fluctuations on Economic Growth Considering the Level of Development of Financial Markets in Selected Developing Countries

Author

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  • Mehdi Basirat
  • Arezoo Nasirpour
  • Alireza Jorjorzadeh

Abstract

This study aimed to investigate the effect of exchange rate fluctuations on economic growth considering the rate of development of financial markets in developing countries over the period 1986-2010. The effects of variables such as trading volume, inflation, and production of the previous period on economic growth have been studied as well. The results obtained by analyzing panel data of 18 countries show that the effect of financial development on economic growth as well as the effect of exchange rate fluctuation on economic growth are negative and significant. On the other hand, the mutual effect of exchange rate fluctuations and financial development on economic growth is positive, but the effect in the studied countries is so small that is not statistically significant.

Suggested Citation

  • Mehdi Basirat & Arezoo Nasirpour & Alireza Jorjorzadeh, 2014. "The Effect of Exchange Rate Fluctuations on Economic Growth Considering the Level of Development of Financial Markets in Selected Developing Countries," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(4), pages 517-528.
    • Handle: RePEc:asi:aeafrj:v:4:y:2014:i:4:p:517-528:id:1175
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    Cited by:

    1. Ruwan Jayathilaka & Rishani Rathnayake & Bhakthi Jayathilake & Thanuja Dharmasena & Dananja Bodinayake & Deumi Kathriarachchi, 2023. "Exploring the growth direction: the impact of exchange rate and purchasing managers index on economic growth in Sri Lanka," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(3), pages 2687-2703, June.
    2. Deeviya Patel & Gisele Mah, 2018. "Relationship between Real Exchange Rate and Economic Growth: the case of South Africa," Journal of Economics and Behavioral Studies, AMH International, vol. 10(1), pages 146-158.
    3. Zainab Jehan & Iffat Irshad, 2020. "Exchange Rate Misalignment and Economic Growth inPakistan: The Role of Financial Development," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 59(1), pages 81-99.

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