Impact of Exchange Rate on Macroeconomic Indicators
Authors: Aleksandre Ergeshidze
The exchange rate is a pivotal pricing instrument that simultaneously impacts various components of the economy. Depreciation of nominal exchange rate is export promoting, which might be a desired export-led growth policy, and particularly critical to closing-down the widening current account imbalance. However, negative effects resulting from high dollarization and high share of imported intermediate inputs can outweigh positive effect. The aim of this research is to quantify impact of change in nominal exchange rate and test contractionary depreciation hypothesis on Georgian economy using structural and Bayesian vector autoregression. According to the acquired results, appreciation of nominal exchange rate is expected to decrease inflation, monetary policy rate, interest rate on domestic currency loans and economic growth in the medium run; however, impact on economic growth in the short run is statistically not significant.
Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1316151Procedia APA BibTeX Chicago EndNote Harvard JSON MLA RIS XML ISO 690 PDF Downloads 580
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