Determinants of Exchange Rates in Somalia

Abstract

Article HistoryThe purpose of this paper is to investigate the factors that determine exchange rates in Somalia and how those factors influence the exchange rates. To examine the relationship, a Monetary Approach to Exchange rate is employed to estimate the effects of trade balance, money supply, external debt and lack of government on exchange rate in Somalia for the period from 1970 to 2014 using MRA under OLS method. Main findings indicate that trade balance, money supply and external debt has a negative significant relationship to exchange rate in Somalia while lack of Government has a positive relationship to exchange rate. Also, this study examined some variables. Exchange rates also may be affected by some other factors that have not been considered in this study, so that this study recommends that central bank of Somalia should enact policies that improve the political factors it contributes towards gaining value of the Somalia shilling. This study adds lack of government to Monetary Approach Model, which has not been found in the scholarly literature. Contribution/ Originality:This study is one of very few studies which have investigated in Somali from 1970 to 2014. The study applied monetary approach model under Ordinary least square method. The main findings are consistent with previous studies on this subject.

The determinant impacting on bilateral exchange rate : a case study of the Thai Baht against the U.S. Dollar

“…The empirical results tested by OLS which implies that if relative price levels increase by one, the value of Thai baht per one U.S. dollar rises by 11.0057, holding other factors constant. This result is similar toIsse & Ibrahim (2017), in which they examined that inflation is not substantial to the exchange rate. However,Hsieh (2009),Chaiphat (2017) andLi et al (2019) found that the larger inflation differential causes the changes in their home currencies.The domestic interest rate is significant at 1% because its p-value is 0.0000.…”