An Application on the Causality Relationship Between Exchange Rate and Industrial Production (2005-2019)

Sevgi Çalişci̇ () and Pelin Karatay Göğül
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Sevgi Çalişci̇: Dicle University, Postal: Diyarbakır, Turkey
Pelin Karatay Göğül: Dicle University, Postal: Diyarbakır, Turkey

Bulletin of Economic Theory and Analysis, 2021, vol. 6, issue 2, 1-25

Abstract: Exchange rates are among the most important indicators and prices in an open economy due to their strong effects on current account and other macroeconomic variables in an environment where economic uncertainties increase with globalization. Exchange rates affect the production quantity and value of countries in the industrial sector positively or negatively. Although there are many factors that determine foreign trade, price (exchange) flexibility of foreign trade is the most important factor in real life. The purpose of this study, with exchange rate of industrial production in Turkey in the years 2005-2019 to determine whether there is any relation to an econometric analysis. For this purpose the relationship between the exchange rate of industrial production in Turkey, CPI Based Real Effective Exchange Rate and the Industrial Production Index, total industry variables 2005: Q1-2019: Q1 between the three-month period were examined by applying the time-series data analysis. Then, long-term relationship between variables was analyzed by Engle-Granger and Phillips-Ouliaris cointegration tests and Toda-Yamamoto (1995) causality test was performed on the variables. As a result of the cointegration tests applied to the variables, long-term cointegration relationship was found between exchange rate and industrial production. As a result of the causality analysis, no relationship was found between exchange rate and industrial production.

Keywords: Exchange Rate; Industrial Production; Causality (search for similar items in EconPapers)
JEL-codes: C01 E23 F31 (search for similar items in EconPapers)
Date: 2021
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