The Effect of exchange rate fluctuations on Afghanistan'seconomic growth: during the years 2009-2023

Abstract

 It is quite clear that the exchange rate is one of the essential variables in macroeconomics; hence its fluctuations affect other economic’ variables as well. The purpose of the current research is to comprehend the effect of exchange rate fluctuations on Afghanistan’s economic growth using the vector auto -regression (VAR) model, during the 2009-2023 years. The results of research obviously show that there is a negative and significant relationship between the exchange rate variable and the economic development. This is due to the relevancy of the country’s economy, the industrial, service and agricultural sectors to the import of raw material and inputs. On the other hand, there is a positive and significant relationship between the export variable, the formation of fixed gross domestic capital and economic growth, which means that the increase of exchange rate through strengthening exports and enlarging the investment capacities will cause the economic growth. According to the mentioned results, for the competitiveness of export goods in universal markets and for decreasing the economy’s dependency to imports, it is requested to utilize the strengthening import substitution strategy for the development of the country.