Analysis of Factors Affecting Fluctuations in the Exchange Rate of Polish Zloty Against Euro

In recent decades, one can observe a rapid development of global financial market and financial services. In these circumstances, the dynamics of exchange rates have an increasing impact on the overall macroeconomic situation in countries around the world. This applies particularly to countries such as Poland, where domestic monetary policies cannot influence the world interest rates. For these countries, the exchange rate becomes a major tool in adapting to changing external conditions. Therefore, identification of the factors that determine exchange rate levels is an important theoretical task, having great practical significance. Poland’s exchange rate policy evolved from the fixed exchange system to the pure float. Till the end of the 1990s, two kinds of the stable exchange rate regime were used in this country: the crawling peg (1991-94) and the crawling band (1995-99). The official floating of the Polish currency was announced in April 2000, when the band was abandoned. As in many other countries, Poland was pushed toward floating exchange rate due to the cost of having stable exchange rate in the environment of the increased mobility of international capital flows (Slawinski, 2008, p. 414). The main objectives of this study are to analyse the determinants of the exchange rate of the Polish zloty against euro and to find which of them play the most important role as factors affecting the zloty values.