Determinates of Exchange Rate Fluctuations – Selected Macroeconomics Financial Indicators

Abstract

The Indian economy faces higher unpredictability affected significantly by exogenous stuns. Every single foreign transaction is influenced concerning variances in the exchange rate. This has caused expanded vulnerabilities in rupee deterioration against the international currency, which understudy adversy affects Indian economy.  The main aim of the paper is to investigate the macroeconomic components influencing the significant exchange rate USD/Rupee. The Exchange rate is dependent variable and the independent variable are GDP is real GDP (%), IR (CPI %) Inflation rate, RM is reserve money;  EXP is exports growth, and IMP is imports, CAB is current account balance, DSR is debt service ratio,  external debt outstanding, FDI is Foreign direct investment. To test the hypothesis ANOVA is used in the study. Regression analysis is used to find the relationship between the Exchange rate and the variable selected in the study. It is found that out of nine free factors, seven factors affect the exchange rate these are GDP, Exports, Imports, FDI, CAB, DSR and External debt. The R square in the model fit is 99.99, which show that exchange rate scale to 99.99 % to the above autonomous variable mentioned above. The study show that inflation and Reserve money don’t affect the Exchange rate.