GNP and other indicators

Gross national product is the key index of the state of national economy and includes less large economic indicators as constituents. Such indexes are included as consumption, investments' level, government spending, export, import. There is direct dependence between the change of index of GNP and rate of exchange. Logic of such changes is quite simple: the GNP growth means the common good state of economy, increasing level of industrial productivity, growing flow of foreign investments in a national economy, growth of export for the country. The increase of foreign investments and export's level result the increase of demand for national currency from the side of foreign agents. This is expressed in growth of its course. The GNP growth proceeding during a few years results the "overheat" for national economy. This is expressed through growth of inflationary basis and, consequently, it leads to expectation of increase of interest rates (as the main anti-inflationary measure from the government). All these processes also multiply demand for the currency.

Level of the real interest rates is the next indicator in this list. This factor is extraordinarily important, because determines total revenue, investments in an economy, countries (percent on bank deposits, profitableness on the investments in a bond, level of middle-norm incomings for the economy etc.). Change of interest rates and currency exchange rate also are in direct dependence. Speaking about rates, it is necessary to mean the real interest rates, i.e. rates based upon percent of inflation.

Thus if nominal rates grow slower, than growth of inflation and GNP, a currency exchange rate can go down. Conducting more deep analysis, it is necessary to mark that the difference of interest rates between two countries is expressed in forming of exchange rate of two currencies (percent differential). If in two countries exemplary identical level of interest rates, characterizing the identical profitableness of investments in the economy of any of countries, increase by the central bank of one of countries of level of registration rate, causes displacement of profitableness in behalf on the investments in this currency, that accordingly results in the increase of demand for this currency and growth of its course.