The augmented monetary model and exchange rate fluctuations; case of RUB/USD

Abstract

The present study is examining the impact of macro-economic variables towards exchange rate determination in Russian Federation currency, Ruble. In order to achieve this aim, the monetary model of exchange rate determination is applied here. This study contributes to the literature by adding a new variable of Oil Price into the flexible price monetary model. This objective is examined through a regression analysis. The data is collected from 1998-2013 and natural logarithm is taken. The empirical results revealed that the augmented monetary model is not validated. But there found a significant relationship between oil price and Ruble. The industrial production function is identified not to be significant in the model.