Exchange Rate Volatility and Its Impact on Ma...

Exchange Rate Volatility and Its Impact on Macro Economic Variables: A Study on Indian Economy

Author Name : Sajeev U, Vijisha Priya. K

ABSTRACT

Exchange rate is the rate at which one currency is exchanged for another. A currency of a country will have different exchange rate with other currencies, its because of the value of the currency compared to others will be different. So, according to the changes in the value of the currencies, there will be various exchange rate for one currency with others. As per the Purchasing Power Parity Theory, Ecxchange rate of two currensies are the ratio of one currency in terms of another. The exchange rate volatility effects the international transfer of goods and services and it can influecne the not only the foreign reserves but also in various macro economic variables of an economy. So, here, through the study, we have analysed the exchange rate volatility and its impacts on macro economic variables on Indian economy, during the period from 1990-91 to 2018-19. For that it focuses on the dollar-rupee exchange rate and its impacts on India’s macro economic factors, especially the performance of Balance of Payments.