Taka-dollar exchange rate dynamics in relation to federal interest rates and the Bangladesh-USA trade balance: a time series analysis

Abstract

This paper has studied and analyzed the impact of factors like the Federal Interest Rate and Bangladesh US trade balance on the Taka dollar exchange rate using time series analysis. Here, the co-integration relation of the Federal Interest Rate and Bangladesh US trade balance with the Taka-dollar exchange rate has been shown using the Johansen Co-integration Test. After analyzing the data, a long-term relationship has been found between the taka-dollar exchange rate and the Bangladesh-US trade balance, but it also shows that the relationship between the exchange rate and the federal interest rate is weaker, which means the Fed rate does not have any impact on the exchange rate. This paper offers strategic advice for reducing negative economic effects and informs politicians and economists regarding the fundamental factors affecting currency stability.