Abstract

Global economic trends have undergone significant transformations, exacerbated by the COVID-19 pandemic, which severely impacted incomes, particularly in middle-income segments. These disruptions have affected financial markets worldwide. This study examines the relationship between exchange rate fluctuations and economic growth in emerging markets, focusing on the Middle Eastern and Indian money markets. Drawing on secondary data from published studies, the paper analyzes factors contributing to currency volatility, including currency mismatches, market imperfections, and political-economic dynamics. The findings suggest that exchange rate flexibility can mitigate output volatility and currency mismatches, but its effect on long-term financial development remains inconclusive. Policy implications underscore the importance of credible monetary regimes, managed exchange rate flexibility, and hedging mechanisms to stabilize financial markets.