Analyze the Impact of Exchange Rate on Inflation Rate: Kuwait as a Case Study for the Period of 1990 to 2019


1.Ayman Abdalmajeed Alsmadi,2.Mohammad Salem Oudat ,3.Basel J. A. Ali,4.Omran Ahmad Al-Ibbini
Vol-175-Issue-Oct-28-2020

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Abstract

For the last year, one of the most critical topics in many countries was the exchange rate. Daily news affecting economy may have some explanation power. However, if we look from a broad view there should be bigger and more general factors for exchange rate movements. These general factors can be listed as a differential in inflation rates and changing in interest rate. In addition, this study aims to estimate the impact of exchange rate system on the inflation, the data of Kuwait Central Bank has been used for the period of 1990-2019. In addition, OLS has been applied on the data. The relationship between exchange rate and inflation rate in Kuwait was showed by (OLS) method. The estimated coefficient between inflation and real effective exchange rate was 0.01 and was not significant. The results of this study concluded that the rate of inflation rate not effected exchange rate in Kuwait during the period of this study. Key Words: Exchange rate, Inflation Rate, OLS, Time Series.

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