Determinants of the Hungarian forint/ US dollar exchange rate

Abstract

Applying the EGARCH model and using demand and supply analysis, this paper finds that the HUF/USD exchange rate (units of the Hungarian forint per U.S. dollar) is positively associated with the U.S. Treasury bill rate, U.S. real GDP, the U.S. stock index, the Hungarian inflation rate and the expected exchange rate and negatively influenced by the Hungarian Treasury bill rate, Hungarian real GDP, the Hungarian stock index, and the U.S. inflation rate. The HUF/USD exchange rate has a long-term equilibrium relationship with these time series variables.

Keywords

• Exchange rates
• Interest rates
• Real GDP
• Stock indexes
• Inflation rates
• EGARCH