Subject and purpose of work: This paper examines empirical implications of exchange rates in the economy of the Kingdom of Saudi Arabia (KSA). In particular, it aims to identify and evaluate potential macroeconomic signs and symptoms of economic disturbance so as to determine macroeconomic variables that influence spot exchange rate (1GBP = SAR), and to examine how fixed exchange rate regime influences exports and imports in the Kingdom of Saudi Arabia (KSA).
Materials and methods: Multiple regression and simple linear regression models were used to analyze the data from 1975 to 2018.
Results: The study found a weak and insignificant relationship between spot exchange rate and unemployment rate, inflation rate, exports, and economic growth, along with strong relations with imports, investment, and current account variation in the KSA.
Conclusions: The study recommends the adoption of a floating exchange rate regime in the KSA. It has revealed the signs and symptoms of increases of the inflation rate with decreasing exports, increasing imports, decreasing of current account (current account deficit threat), and small increases of investment.
