Relationship Between GDP, Inflation and Real Interest Rate with Exchange Rate Fluctuation of African Countries

This paper tries to explore the relationship between, gross domestic product, inflation and real interest rate with the exchange rate. 10 African countries with 15 years of data from 1996 to 2010 were used for this study. Three independent variables i.e. inflation, interest rate and Gross Domestic Product were used in order to investigate their relationship which causes exchange rate fluctuations. Three hypotheses served as a basis to analyze the results. Based on the analysis, it is found that that the GDP has significant relationship with the exchange rate where interest and inflation has non-significant relationship with the exchange rates of African countries.