Determinants of the exchange rate in Angola during the period between 2005 and 2018
Keywords:
Exchange rate; Correlation analysis; Multiple linear regression model; Granger's causality; Angola.Abstract
This study aims to examine the factors that influence the exchange rate in Angola, during the period between 2005 and 2018. Correlation analysis was used, as well as the multiple linear regression model and Granger's causality. The results demonstrate the existence of a positive relationship between the dependent variable (Exchange rate) and two independent variables (Trade balance and gross domestic product), and the existence of a negative relationship between the exchange rate and inflation. Furthermore, Granger's causality tests verified an unidirectional relationship between the gross domestic product and the exchange rate, with statistical significance of 10%. Finally, from the estimation of the multiple linear regression model, a significant positive relationship was found between the exchange rate and two other macroeconomic variables (trade balance and gross domestic product). These results show that the two macroeconomic variables mentioned above are fundamental determinants of the exchange rate in Angola, during the period under study.
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