The Impact of Exchange Rate Volatility on Stock Exchange

Abstract

The exchange rate volatility is considered the most significant element that influences the production of stock prices. The stock exchange plays a significant role within a country's development and stability. The key object of this repo11 was to investigate the effect of exchange rate fluctuations on the Pakistan Stock Exchange ( PSX). To demonstrate the association of cause and effect between the component under study, the concept of correlation analysis is used. This research has had explanatory consistency. Two financial variables were evaluated where the volatility of the exchange rate is used as an independent variable while the price of the stock is calculated as dependent. Ten years of monthly secondary data from January I , 2009 to December 31 , 20 I 8 have been analyzed. Results of the study found that the link between fluctuations in the exchange rate on Pakistan's stock price was favorable and statistically significant. Based on key results , this study primarily postulates that countries like Pakistan with a developed economy are obsessed with macroeconomic variables , i.e. exchange rate fluctuations and Pakistan's stock price, so that the public can use the knowledge of a major macroeconomic variable, in particular exchange rate volatility, to anticipate the country 's behavior.