Country's GDP and how it affects currency

Discussion in 'Economics' started by propslave, Jan 1, 2010.

  1. For those who have a stronger economic background than me, maybe you can help me out - if one country's GDP is expected to grow by 10% next year and another country expects to see only 1% GDP growth, would you expect the currency of the country with the greater GDP growth to outperform that of the lesser?
  2. the1


    I'm not an economist but I know you're asking a very complicated question that has many variables with the biggest one being, how much debt a country assumed to drive GDP. The current economic climate is a good example. The GDP in the US is growing but so is the deficit. That has led to a falling currency.

    This would be a great project for a college paper. Dig up a bunch of variables and do a regression analysis. Eliminate the insignificant variables and repeat. Draw some conclusions and there you go. Give it about 1 month, let the variables change and then you get to do it again. That's why you'll never meet an unemployed economist.
  3. ddefina


    Even if you were an economist you wouldn't have the answer either. They are comparable to weathermen and stockbrokers in accuracy.
  4. Forex is similar to equity markets in that the relationship between a currency's movement and it's underlying "economics" is about as close as the relationship between a stock's movement and it's underlying "fundamentals".

    Meaning -- it's mostly about sentiment, until the shit hits the wall and can't be ignored anymore.

    So the answer to your question is a giant "depends".