Exchange rate is a key macroeconomic variable that effects decisions made by the foreign investors, exporters and other economic agents. The role of exchange rate in the macroeconomic performance of any country is one of the leading and major debated issues in the present days. This study attempts to examine whether uncertainty or fluctuations in exchange rate may affect on major macroeconomic variables in the Indian context. Further, the study focuses on the variables such as consumption, GDP, FDI, interest Rate, GDP growth rate and trade openness towards the objective wise from the data period 1975–2016. To check the real exchange rate volatility the Generalized Auto Regressive Conditional Hetroscadasticity (GARCH) model has been applied in this study and Ordinary Least Square (OLS) regression technique is used to investigate the relationship between exchange rate and other variables. The ARDL model were used for checking long run relationship. Finally, this study found that exchange rate volatility positively affects on Foreign Direct Investment (FDI), GDP, GDP Growth rate, Trade Openness, Interest rate (INT) and negatively impacted on consumption (CON).
Exchange rate volatility, ordinary least square, GDP, growth rate, interest rate and trade openness
