Abstract
Aim: The aim of this research was to understand the interrelationship between inflation, interest rate, economic growth, and exchange rate in the context of the UK. Further, it has also considered the role of inflation.
Method: In the research method a secondary quantitative research method was used, and data has been extracted from Statista and WDI website on inflation, interest rate, economic growth, and exchange rate from 2001 to 2021. For data analysis, descriptive statistics, lag order selection criteria, unit root test, VAR model, and impulse response test was used through using Eviews software.
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Economic factors like interest rate, exchange rate, inflation and economic growth have a major contribution to the trend being followed in the economic cycle. These factors are influential towards the economy because they affect the overall economy. The monetary policies set out the exchange rate and interest rate, which may impact the overall performance economy because any change in the policy goes with an increase and decrease in the rate of exchange (Sergi et al., 2021). COVID-19 has played a major role in almost all sectors. The pandemic changed the way of living, and it also had an influence towards the survival of the economies, as the major influence was towards the trends being followed in the economic sector.
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