Do Monetary Policy Measures Affect Foreign Exchange Rates during the COVID-19 Pandemic? Evidence from Turkey

Mustafa Kartal, Özer Depren and Serpil KILIC Depren

Journal of BRSA Banking and Financial Markets, 2021, vol. 15, issue 2, 175-202

Abstract: The study examines how foreign exchange (FX) rates in Turkey are affected by the pandemic considering the impacts of monetary policy responses to the pandemic. Selected FX rates are examined by using 10 independent variables containing monetary policy indicators and the pandemic figures. In this context, daily data from February 1, 2019 to August 31, 2020 that consists of the pre-pandemic and the pandemic periods are considered and machine learning algorithms are applied. The findings reveal that the pandemic and monetary policy indicators have a statistically significant and high effect on the FX rates, and the influence of independent factors on the FX rates vary according to the periods. According to the results of the study, it is emphasized the importance of the pandemic and monetary policy measures on the FX rates because monetary policy indicators have a statistically significant and high impact on the FX rates in Turkey for the pandemic period.

Keywords: FX rates; Machine learning algorithms; Monetary policy; Turkey. (search for similar items in EconPapers)
JEL-codes: C14 C39 E44 E52 F31 N14 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:bdd:journl:v:15:y:2021:i:2:p:175-202

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