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Exchange rate sensitivity influencing the economy: The case of Sri Lanka.
Thevakumar, Presant; Jayathilaka, Ruwan.
  • Thevakumar P; SLIIT Business School, Sri Lanka Institute of Information Technology, Malabe, Sri Lanka.
  • Jayathilaka R; Department of Information Management, SLIIT Business School, Sri Lanka Institute of Information Technology, Malabe, 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.
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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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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