Exchange rate sensitivity influencing the economy: The case of Sri Lanka.
PLoS One
; 17(6): e0269538, 2022.
Article
in English
| MEDLINE | ID: covidwho-1933337
ABSTRACT
This particular study investigated the possibility of modelling the exchange rate volatility of the USD/LKR currency pair and analysed whether macroeconomic factors influence the exchange rate. To model the exchange rate volatility, a combination of Autoregressive integrated moving average (ARIMA) and generalized autoregressive conditional heteroskedasticity (GARCH) family models were used. The ARDL model was utilized to explore the presence of dynamic short-run and long-run relationships between the exchange rate and macroeconomic variables. The ARDL model empirical findings inferred that a long-run relationship does not exist between any of the examined macroeconomic variables and the exchange rate. In contrast, a short-run relationship exists between exchange rate lag one, exchange rate lag two, inflation, and merchandising trade balance. Thereby, as per the findings improving the merchandising trade balance and minimising inflation would minimise volatility in the exchange rate. All stakeholders who are exposed to foreign exchange volatility including policymakers, importers, exporters, and financial institutions can benefit from this study's findings. This research focused on the most recent economic phenomena of Sri Lanka and used Gross official reserve as a variable that was rarely used in existing literature on Sri Lankan exchange rate.
Full text:
Available
Collection:
International databases
Database:
MEDLINE
Main subject:
Carbon Dioxide
/
Internationality
Country/Region as subject:
Asia
Language:
English
Journal:
PLoS One
Journal subject:
Science
/
Medicine
Year:
2022
Document Type:
Article
Affiliation country:
Journal.pone.0269538
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