A Comparative Analysis Of Exchange Rate

1.0 Overview Summary
Magda Kandil, Nazire Nergiz Dincer, in their article "A comparative analysis of exchange rate fluctuations and economic activity: The cases of Egypt and Turkey" about the appreciation or depreciation in exchange rate will affect the price of the output of the country either increase nor decrease the price of home goods relative to the foreign goods. Aggregate demand will decrease when currency fall from an initial trade and it will reduce the real national income. The writer also observes that if the price increase and there is high to save from the salary, cause the national savings will rose up and affect the output will fall down. Depreciation in the currency will affect the economic performance especially the output

Both authors are aim to analyzes the analysis of the relationship between exchange rate and the macroeconomy in Egypt and Turkey. The data is analyzes based on the time series data of the output and price level from the period 1980-2005. The result for the unit root test is all the data stationary at first differences whereas the prices is stationary at second differences in Turkey. For Egypt, all the varibles are stationary at first differences but fot the price and output are stationary at second differences. Authors also insert lag in all variables that might corresponding to movements in the exchange rate and the lag structure is determine by the Akaike Information Criteria. The real exchange rate doesn't obtain a high degree of persistence in Turkey but the lagged exchange rate is important in Egypt and obtaining a higher degree of persistence. This illustrate that increasing in the trade balance may leads to a changes of the exchange rate. The author also analyse the data of effect of exchange rate on output, the price level and the components of aggregate demand in this research. Based on the result, the government spending is significant in real output growth in Turkey. Appreciation of the exchange rate will have the negative effect on the output growth this will lead to the demand for the output. Wald test statistic

Authors can try to use another method to run the data example like panel estimation not only using time series data. Lack of data to analyze that the importance of effect exchange rate shock on the economy at the country. Some variables or data might be missing or unreliable or limited to doing this research. Difficult to assume the accurate sample size for this research to know the significant for each variable.
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