Exchange Rate Volatility and Economic Growth: Evidence from Kuwait

Fawad Hussain Paul, Syed Rashid Ali, Ramzan Soomro, Qurrat-ul-Ain Ali, Sayyed khawar Abbas

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Economic Growth, FDI, Inflation, Exchange Rate.


This study analyzes the effect of the nominal exchange rate, Inflation, capital stock and foreign direct Investment on economic growth in Kuwait by using time series data for the period of 1975-2015. All variables are stationary at first difference. The results show that all independent variables have a positive and significant effect on economic growth. We applied some diagnostic test such as LM and BG Test and found free from autocorrelation and heteroscedasticity. The CUSUM and CUSUMSQ tests are used to check whether the model is structurally stable and results confirm that stability of the model. Some fiscal and monetary measures are to be taken to increase the export of nonpetroleum goods.