Factors Affecting the Determination of Exchange Rate in Bangladesh
Published: 2017
Author(s) Name: Jannatul Ferdous Bristy |
Author(s) Affiliation: Lecturer, Human Resource Management Discipline, Khulna University, Khulna, Bangladesh.
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Abstract
The present study has attempted to identify the factors affecting the determination of exchange rate in Bangladesh by
taking into account the values of BDT in terms of US dollar. Sixteen macroeconomic variables have been selected to
test their impact on exchange rate of BDT. Covering a period of 15 years from 1999 to 2013 and using correlation and
simple least square regression methods, this study has found that government expenditure is the most important factor in
the determination of the exchange rate. Among the other factors, broad money supply, gross capital formation, primary
income payments, gross domestic product, external debt stock, and gross national income are also important. On the
other hand, total reserve, current account balance and deposit rate are of moderate importance. Again, inflation, lending
rate, net financial account, net capital account, foreign direct investment, and primary income receipts are among the
least important factors. It has also been found that increase in lending rate and primary income receipts is expected to
cause appreciation of BDT and increases in all other factors are expected to cause the depreciation of BDT in relation
to US dollar.
Keywords: Determinants, Exchange Rate, BDT, US Dollar
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