Abstract
This paper investigates the relationship between inflation, interest rates and exchange rates. The study contains the previous work to support the robust study to find the impact of independent variables on dependent variable. In this case, interest rates and inflation is taken as independent variable and exchange rate as dependent variable. To find out the impact of these variables, data of interest rates (Pakistan and United Kingdom), inflation (Pakistan and United Kingdom) and exchange rate between Pakistan Rupee and British Pond Sterling of the last fifteen years (1994-2009) on monthly basis are analyzed. A Multiple Regression Model is applied to check the relationship of inflation and interest with exchange rate. Results show that a significant but positive relation is found between inflation and exchange rate while a negative and significant relation is fond between interest rate and exchange rate. This study can be further extended to check the lead-lagged effect of these independent variables on dependent variable.
| Original language | English |
|---|---|
| Pages (from-to) | 58-62 |
| Number of pages | 5 |
| Journal | International Research Journal of Finance and Economics |
| Volume | 46 |
| Publication status | Published - 1 Sept 2010 |
| Externally published | Yes |