Testing the correlation between exchange rates and inflation rates in Syria from 1980-2022

Abstract

he Syrian economy witnessed structural changes which affected the balance of the aggregate supply and aggregate demand in internal and external trade, due to changes in both the exchange rate of the Syrian lira and inflation rates in the Syrian economy during the period (1980-2022). This imbalance is due to structural economic fluctuations, and assuming that the inflation rate does not affect the exchange rate on the long term, stability tests, joint integration theory and a Granger causation test were used. It came with a causal relationship of the rate of inflation in the exchange rate, meaning that the average inflation rate causes movements in the exchange rate, that is, there is a long -term balanced relationship between the Syrian lira exchange rate against the US dollar and the inflation rate in Syria during the studied period from 1980 to 2022