A Study On The Determinants Of U.K Exchange Market, Its Volatility And Behavior In The Long Run | P Sreelakshmi & Manogna

This study was conducted on the determinants of U.K exchange rate. The main focus was to find out the factors which affect the currency and also to know the reasons behind its extreme volatility. The research is done by taking the data related to the U.K exchange rate i.e. the price of GBP/USD and factors or determinants of the GBP (United Kingdom) which is interest rate, inflation, GDP, Reserves and other factors from the World Bank database as these sources are considered for their authenticity.

This research explains the method used in order to find out the factors, in addition to grouping of the factors based on the same analysis. In order to group factors the factor analysis is run in SPSS and then simple linear regression is run on the set of two factors to know the effect of factors on the exchange rate.

The analysis proved that these factors affecting the currency are negatively correlated, hence change in any factor will lead to a negative change in the value of the exchange rate which also shows the importance and effect of these factors. this study outspreads the analysis to the case of United Kingdom and serves as a guide for estimation stage to facilitate the required theoretical foundation that would be beneficial for predicting exchange rates in United Kingdom