A STATISTICAL INQUIRY ON THE RELATIONSHIP BETWEEN EXCHANGE RATE AND ECONOMIC INDICATORS IN THE PHILIPPINES

Abstract

The purpose of this study is to determine the relationship between exchange rates and economic indicators, namely: gross domestic product (GDP), inflation rate, and interest rate in the Philippines and how these economic indicators affect exchange rates and vice versa. The study reveals that GDP and inflation rate do not predict exchange rate when taken individually. On the contrary, interest rate has an influence on exchange rate when taken individually. Similarly, multiple regression analysis shows that economic indicators as a whole predict exchange rate. Moreover, exchange rate has a strong relationship with interest rate. In summary, economic indicators, when taken as a whole, have a significant relationship with exchange rate. However, interest rate has significant relationship with exchange rate.

Keywords: exchange rate, gross domestic product, inflation rate, interest rate