THE IMPACT OF GLOBAL MARKET DYNAMICS ON EXCHANGE RATES IN EMERGING ECONOMIES: A SYSTEMATIC REVIEW
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Abstract
This systematic review investigates how global market dynamics influence exchange rate behavior in emerging economies. Synthesizing evidence from 2000 to 2023, it highlights four major transmission channels: global uncertainty and risk factors, financial integration and spillover effects, technological innovations in finance, and commodity market dynamics. The findings reveal that global risk events, such as shifts in U.S. monetary policy and volatility indices like the VIX, significantly impact emerging market currencies, often triggering capital outflows and heightened currency depreciation. Financial globalization has intensified these effects, shifting exchange rate determinants from trade-based to financially-driven mechanisms, complicating traditional monetary policy frameworks. Technological innovations, including the rise of digital finance and cryptocurrencies, have further altered capital flow behaviors, adding new layers of volatility. Additionally, commodity price fluctuations remain a critical driver of exchange rate movements in resource-dependent economies. The review underscores the importance of institutional quality, macroeconomic stability, and adaptive policy frameworks such as managed floating regimes and macroprudential tools in mitigating external shocks. It also identifies key research gaps, particularly concerning the long-term structural impact of global integration and the evolving role of digital finance. The study offers valuable insights for policymakers, investors, and researchers navigating the increasingly interconnected and technologically dynamic global financial landscape.
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