ECONOMIC FACTORS ON EXCHANGE RATE BETWEEN BAHT AND US DOLLARS: ERROR-CORRECTION MODEL

Abstract

This research aims to study factors about economic variables which correlate the foreign exchange rate between Thai baht and U.S. dollars in both short and long terms. The economic factors were statistical value of Gross Domestic Product (GDP), policy interest rate, inflation rate, export and import value of Thailand, using time series data. The analysis of the long run equilibrium relationship is also known as a cointegration relationship. By implementing the Error Correction Model in the short term, the research result indicated that the inflation rate and export value are economics factors affecting exchange rate in the long term significantly, in short run the research found that inflation rate, export value and GDP are economics factors affecting exchange rate significantly.