What is the impact of increase in domestic interest rate on the exchange rate..?
Dear student,
with an increase in the interest rate in the domestic economy, the demand for domestic currency would rise. This is because investment in the domestic economy would be more lucrative for the foreigners. Other things remaining same this would lead to an appreciation of domestic currency.
with an increase in the interest rate in the domestic economy, the demand for domestic currency would rise. This is because investment in the domestic economy would be more lucrative for the foreigners. Other things remaining same this would lead to an appreciation of domestic currency.