Monetary policy, inflation, and exchange rate dynamics: evidence from the Turkish economy (2001-2023)

Erick Okoth
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Erick Okoth: Sakarya University, Turkey

Theoretical and Applied Economics, 2025, vol. XXXII, issue 2(643), Summer, 165-188

Abstract: The concepts of interest rates, exchange rate and inflation have become key variables in ensuring economic balance both internally and externally. This study investigates the relationship between interest rate, exchange rate, and inflation in Türkiye over 2001-2023 using ARDL-ECM, FMOLS, and CCR methods. Secondary data from the Central Bank of Türkiye and the World Bank were used. Findings show that nominal interest rate is positively associated with inflation, exchange rate, economic growth, and unemployment. The study recommends a balance between accommodative monetary policies and financial stability to support sustainable long-term growth aimed at maintaining internal and external economic balance.

Keywords: interest rate; exchange rate; inflation rate; economic growth; Türkiye. (search for similar items in EconPapers)
Date: 2025
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