Najibullah Arshad, Shams Al Rahman Samadi Mohammad Ehsan Erfani
Abstract
The exchange rate and its
impacts are one of the challenges and important topics in macroeconomics that
developed and developing countries strive to control economic shocks such as
inflation while maintaining exchange rate stability and creating a conducive
environment for sustainable economic growth. Exchange rate fluctuations can
have extensive effects on economic growth and inflation rates, posing
significant challenges for economic policymakers, business managers, and
consumers. Therefore, this research examines the impact of exchange rate
fluctuations on economic growth and inflation rates in the SAARC member countries
during the years 2020-2002. The data is extracted from the World Bank and
Heritage Foundation websites, and the research models are estimated using the
Generalized Least Squares (GLS) method. The findings indicate that the impact
of exchange rate fluctuations on economic growth in SAARC member countries was
not statistically significant. However, it has a positive and significant
impact on the inflation of this group of countries. Therefore, it is
recommended for SAARC member countries to control exchange rate fluctuations to
manage inflation.
Keywords: Exchange Rate Fluctuations,
Economic Growth, Inflation, SAARC, Panel Data