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MACROECONOMİC INDICATORS THAT AFFECT THE COUNTRY'S ECONOMY AND THE IMPACT ON NATIONAL CURRENCY

 

The stability observed in the country's economic development leads to the growing interest of foreign investors in that country and appropriately to an increase of the demand for the country's currency. The main macroeconomic factors that affect a country's economic development are the following:


TRADE BALANCE AND PAYMENT INDICATORS

In many developing countries, an increase in trade balances is indicative of economic development of a country. However, the increase in a trade balance also means the indebtedness and the rise of inflation in a country. Thus, in the industrialized countries, that is the countries that produce more than they consume, a trade surplus ensures the country's economic development through external financing.

UNEMPLOYMENT RATE

The unemployment rate is calculated by dividing the number of unemployed individuals by all individuals currently in the labor force. Housekeeping income will decrease resulted from the raise of the unemployment rate in the country. By this means, consumption in the country decreases.  A decrease in consumption will lead to reduction of labour force and company products. A decline in the unemployment rate might cause an increase of people's income and revival of the consumption sector. Companies, experiencing a shortage of workforce increase their production to meet the growing demand. Low unemployment rate giving rise to a production increase in a country, results in economic growth. The unemployment rate is an objective measure of economic situation in a country. As the value of the national currency of a country with low unemployment rate increases, the value of the national currency of a country with high unemployment rate decreases.

INFLATION

Inflation occurs when the demand for goods and services exceeds existing supplies. Inflation is defined as a sustained increase in the general level of prices for goods and services. In economics, the price for goods and services rises as a result of increasing demand for the productivity. When this happens, the general level of prices increases and inflation occurs. 

As inflation indicators rise the productivity decreases and funds flow from a producer to intermediary organizations. The fall in inflation rates below an optimal level results in stagnation in the financial and trade sectors. Inflation rates at the optimal level create such a balanced situation in production that causes an increase of production efficiency and operational performance of companies. The positive level of inflation figure has a positive impact on a domestic demand and economic growth. However, countries with a high level of inflation experience a rising income inequality that adversely affects an economic development and regional stability.


GROSS DOMESTIC PRODUCT (GDP)

  1. The gross domestic product (GDP) is one of the primary indicators used to gauge the level of a country's economic development;

  2. The value of a country's overall output of goods and services (typically during a specific period of time) at market prices;

  3. Important macroeconomic indicator used to show changes in GDP, the growth and decline in a country's economy;

  4. Generally, GDP is usually calculated on an annual basis and the rise of GDP per capita is directly proportional to standard of living;

  5. A country with high GDP per capita will have a higher standard of living.

INTEREST RATES

One of the most important factors that affect currency prices is a country's interest rates. The difference in interest rates between two countries give rise to price fluctuations. Difference in interest rates in different countries affects international capital flow. In other words, the rise of interest rates in one country results in an increase of its currency value while the decrease of interest rates leads to a loss of currency value.


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