Higher exchange rates link to lower consumption
Comparing Official exchange rate, LCU per USD, period average with Households and NPISHs Final consumption expenditure (current US$), per capita across 166 countries, 2022–2026.
- Rank correlation
- -0.59
- Holding size constant
- -0.45
- Countries compared
- 166
- Period
- 2022–2026
What might link these
A possible link between the two indicators could be the impact of exchange rates on purchasing power, with a stronger exchange rate potentially reducing the affordability of imported goods. However, a careful reader should be cautious about the influence of other economic factors, such as inflation, which could be a likely confounder. The relationship might also be driven by differences in economic systems or policies across countries.
Why this is not proof of anything
This is a correlation across countries, not an experiment. It cannot show that either indicator causes the other, and both may simply follow a third thing. This correlation could mislead by suggesting a direct relationship between exchange rates and consumption, when in fact other underlying economic factors may be driving the observed association.
The second figure above repeats the measurement with national population and income held constant. It is the more conservative number: a relationship that largely disappears there was mostly telling you that larger, richer countries have more of most things.
How this was measured
Both indicators were ranked across every country reporting each, and the two rankings compared — ranks rather than raw values, because a handful of very large countries can otherwise manufacture a relationship on their own. The calculation is arithmetic over figures already published on this site; the commentary above is drafted from the two indicator names and the resulting coefficients.