Suppose you are asked to forecast the direction of the change in the #Indian Rupee (INR) per 1 British pound (GBP) exchange rate for 2021. You have obtained the following forecasted data for 2021:

India United Kingdom (U.K.) 

Real GDP growth (%) 7.0% 3.2%  

Inflation rate (%) 4.0% 1.8%  

Nominal interest rate (1 year maturity) 4.1% 0.5%  

Current account balance as % of GDP -0.9% -3.8%  

   What do the above data suggest will be the direction (not the magnitude) of the change in the #INR/1GBP exchange rate over 2021? Briefly discuss your predictions based on each of these factors in the above table on the exchange rate and then draw an overall conclusion.  Are there any other factors that should be considered for this prediction?

Answer rating: 100% (QA)

To forecast the direction of the change in the INRGBP exchange rate for 2021 we can consider the fol... View the full answer