Essay: Exchange Rate Determination in UK
The exchange rate determination in UK is not an exception to the contemporaneous developments in econometric theory in economics field. This is because the economic world today is competitive and dynamic. This competition and dynamism that engulfs the economic arena of exchange rate require keen studies to establish the reliability and validity of monetary models used in determining the exchange rate. United Kingdom enjoys a relatively good and positive economy than other European counterparts. Evidently, sterling pound is strong against the euro and even the US dollar. This is because of the nature of economic structure and policies.
In addition to that, UK attracts large quantity of foreign investors due to its open economy. Thus, in policies regarding to monetary policies especially exchange rate determination should be good enough to sustain and attract other foreign investors. It is in this line of thought that this dissertation chapter shall empirically examine exchange rate determination in UK. In order to do that effectively, the paper look forward to validate the monetary model in the determination of the sterling pound exchange rate by applying cointegration methodology.
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