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- Title
THE RELATIONSHIP BETWEEN INTEREST RATE AND EXCHANGE RATE IN A SMALL OPEN ECONOMY: THE CASE OF REPUBLIC OF NORTH MACEDONIA.
- Authors
GRAMATIKOVA, Radica DISHLIESKA --.; RISTESKA, Kristina
- Abstract
This study examines the relationship between the interest rate and the exchange rate of the Republic of North Macedonia. In our survey, we used time series techniques such as unit root tests, cointegration test, causality test and vector error correction model. Quarterly data from January, 2000 to December 2020 were used for the study. Using Johansen test for cointegration, the obtained results confirmed that between the series, three cointegration connections were determined according to the cointegration rank test based on the maximum inherent value. Based on this, the existence of three cointegration links between interest rates and the exchange rate indicates that there is an economic relationship between them in the long run. Using Granger causality test, the obtained results showed that is not found causality between the discount rate and the exchange rate in the long run. The study has found that the exchange rate Granger cause the interest rate on treasury bills, i.e. changes in the exchange rate would lead to changes in the interest rate on treasury bills. There is no causality between the interest rate on lombard loans, the reference rate, the default interest rate and the exchange rate.
- Subjects
MACEDONIA; FOREIGN exchange rates; INTEREST rates; FREE trade; GRANGER causality test; TREASURY bills
- Publication
Vizione, 2022, Issue 39, p345
- ISSN
1409-8962
- Publication type
Article