The Effect of Selected Macroeconomic Indicators on Foreign Exchange Rate: An Application on Turkey’s Economy

Kemal Aka

Journal of BRSA Banking and Financial Markets, 2020, vol. 14, issue 1, 99-117

Abstract: The exchange rate plays a vital role in the country’s free trade economy and affects macroeconomic and financial variables such as interest rate, inflation rate, current account balance, foreign trade balance and unemployment rate. Instability and sudden increases in the exchange rate lead to the negative course of economic activities, leading to economic instability. For this reason, the exchange rate in recent years is one of the most talked about topics on for Turkey’s economy. It is important to examine the indicators that are effective for stabilizing the exchange rate and the causality relationship between these indicators.In this study, using quarterly data covering the period from 1988Q1-2019Q2 in Turkey’s economy, interaction between the exchange rate and selected macroeconomic indicators were analyzed using Granger causality test. As a result of the study, one-way from exchange rate to current account balance, terms of trade and foreign trade balance; a bilateral causality relationship between the exchange rate and oil prices was found.

Keywords: Exchange rate; Macroeconomic indicators; Causality test. (search for similar items in EconPapers)
JEL-codes: C10 F31 F40 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:bdd:journl:v:14:y:2020:i:1:p:99-117

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