Impact of Exchange Rate on Economic Growth in Developing Economies

This project explores the impact of exchange rates on economic growth within developing economies, focusing on the effects of exchange rate flexibility and different exchange rate regimes. It investigates the relationship between exchange rate volatility and economic performance, drawing upon past research that analyzes the impact of exchange rate volatility on trade flows. The study utilizes a positivism philosophy and a deductive approach, employing an explanatory research design with secondary data collection from peer-reviewed journals, government reports, and financial reports. The expected outcome is to demonstrate a positive correlation between exchange rate volatility and economic performance in developing countries.

RESEARCH ENQUIRY
Impact of exchange rate on economic growth in
developing countries

TITLE
 The aim of undertaking the study is to
examine the impact of exchange rate
on economic growth in the developing
economies.

RATIONALE FOR STUDY
 The study will aim at understanding the
impact of the exchange rate and the
exchange rate regimes on the economic
performance of developing nations
 The research will help in identifying the
current trends in the exchange rates and the
manner in which the Short-term
movements and volatility of the exchange
rates affect the economic situation of a
developing economy

RATIONALE FOR STUDY
 The study will focus on the different changes in the
economic structure of the developing countries and
thereby identify the manner in which it is affected by
the exchange rates
 The countries with lower inflation encounter a strong
exchange rate, which helps in improving the economic
performance
 Ashour and Chen Yong (2018) studied that fixed
exchange regime experienced growth by 1.2% over
flexible exchange regime
 Fixed exchange rate regime helps the developing
economies in experiencing growth

RESEARCH OBJECTIVES
 To identify the manner in which exchange rate flexibility
has an impact on the economic growth in developing
countries
 To identify the manner in which exchange rate regime
have an impact on the economic growth in developing
countries
 To examine the extent to which the exchange rate
flexibility affect the economic growth in the developing
countries
 To examine the extent to which the exchange rate
regime affect the economic growth in the developing
countries

RESEARCH QUESTIONS
 Does exchange rate flexibility have an impact on
the economic growth in developing countries?
 Does exchange rate regime have an impact on
the economic growth in developing countries?
 What is the extent to which the exchange rate
flexibility affects the economic growth in the
developing countries?
 What is the extent to which the exchange rate
regime affects the economic growth in the
developing countries?

LITERATURE REVIEW
 Past researches has focused on analyzing the
impact of volatility of the exchange rate on flow of
trade in most of the developing countries which
has provided mixed results
 Exchange rates have direct positive influence on
the growth of the economy through its impact on
the shock adjustment process
 There is presence of negative influence on growth
of an economy due to the volatility of the
exchange rate, for example, employment,
investment and international trade

LITERATURE REVIEW
 Exchange rate regimes are considered
as one of the major instruments for
evaluating the efficiency and
effectiveness of the economy
 Prices and wages becomes rigid due to
asymmetrical real shocks and flexibility
in the exchange rates adjusts the
international prices which offsets losses
in production

LITERATURE REVIEW
 External shocks can be easily be absorbed by
exchange rate volatility by increasing the
adaptive capacity
 During economic crisis, countries having
flexible exchange rates experience lower
production losses when compared to the
countries with fixed exchange rates
 Exchange rate regime imposes credibility and
discipline on the constraints and monetary
policy autonomy

LITERATURE REVIEW
 Unpredictable fluctuations in the local
economy is one of the cost of developing
flexibility in the exchange rate which may
result in instability in economy and finance
 Volatility of the real exchange rate is
dependent on the fluctuation of the prices
and nominal exchange rate
 Real or nominal exchange rates does not
affect the overall result and they have
evolved in a fashion which is highly correlated

METHODOLOGY
Research Philosophy
 The study will be utilizing the
Positivism philosophy, which will
assist in identifying the impact of
exchange rate on economic growth in
developing countries through the
utilization of scientifically proven
theories of economics

METHODOLOGY
Research Approach
 The study will be undertaking a
deductive approach, which will assist
in scrutinizing the available models and
theories relating to economics