Examining Predictors of Currency Strength in Developing and Transition Economies

Myslytska, Anna and Kruk, Anton and Khomych, Yaroslav (2023): Examining Predictors of Currency Strength in Developing and Transition Economies.

Abstract

In the globalized world, the strength of a country's currency is paramount, especially for developing and transition economies. This research endeavors to identify the key predictors for currency strength in such countries, with a spotlight on Ukraine, particularly in the aftermath of Russia's invasion. Leveraging cross-country regression analysis, the study examines the factors influencing exchange rates. The findings highlight the role of economic prosperity, import dynamics, and government spending as vital determinants of currency strength, while interest rates, exports, and inflation were found to have less significance. For policymakers, this implies a need to bolster economic growth, manage imports, and ensure prudent fiscal policies. This study not only augments the academic discourse on international finance but also offers actionable insights for economies like Ukraine striving for currency stability.

• Item Type: MPRA Paper
• Language: English
• Keywords: Exchange Rates, Developing Countries, Transition Economies
• Subjects: E - Macroeconomics and Monetary Economics > E0 - General > E00 - General; E - Macroeconomics and Monetary Economics > E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance

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