The Effect of Financial Development in the Relationship between The Exchange Rate Fluctuations And Economic Growth

There are different and sometimes contradictory views on the effects of exchange rate fluctuations on the economic growth. Having studied the views on the subject, Iit seems that the cause of thise ambiguity, is to a great extent, has to do depends on how consideringwith the role of financial development in the analysis. Aghion et al. suggest consider explicitly the role of financial development in their study of the effects of exchange rate fluctuations on the economic growth. They conclude the recommended type of exchange rate regime depends more on the level of financial development of the related economy. that tThe effect of exchange rate volatilities on economic growth is negative in the low level of financial development and is positive in the high level of financial development. In thisour paper, we test thiseir viewtheory by using five-year average annual data of 69 selected countries in a and by using the panel data method. The results confirm the Aghion et al.'s view. Therefore,So,, for the less developed economies, usually with low level of financial development, the recommended policy is try to minimize the exchange rate fluctuations.