What effect does interest rates and currency exchange rates have on a country’s economy?

I need to know this for a group project. We’re meant to be analysing a country’s macroeconomic performance and I’ve been tasked to write about the country’s interest rates and currency exchange rates. I’ve searched about for hours but all I seem to find is news and statistics (they decided to keep interest rates at 1%, the value of the currency has risen etc. etc.) and I don’t know what they mean and how they could be applied to the economy in the big picture. Could someone please help me understand?

By | 2013-08-26T15:19:17+00:00 August 26th, 2013|Mortgages Home Loans Interest Rate|1 Comment

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  1. Joe August 26, 2013 at 3:46 PM - Reply

    higher interest rates discourage investments in capital because the cost of not putting your money in the bank is higher. as a result of the decreased capital investment the economy slows down. the opposite holds true for lower interest rates.

    exchange rates have to do with trade a more valuable dollar makes foreign goods cheaper increasing imports and a less valuable dollar makes foreign goods more expensive but makes domestic goods cheaper for foreigners, this increases exports.

    this is interest rates and currency exchange rates in a very basic overview.

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