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Relationship Between Oil Prices and Real-Exchange Rate in Turkey: An Investigation Using Asymmetric Fourier Causality Analysis

Fatma Kizilkaya ()
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Fatma Kizilkaya: Malatya Turgut Ozal University, Faculty of Health Sciences, Malatya, Turkey

Istanbul Journal of Economics-Istanbul Iktisat Dergisi, 2021, vol. 71, issue 71-2, 549-568

Abstract: Oil-importing developing countries such as Turkey may be adversely affected by the increase in oil prices, which can raise production costs and the overall level of consumer prices. Increases in oil prices in international markets may also adversely affect the foreign trade balance of oil-importing countries. In this study, annual data for the period 1960–2019 in Turkey are used to investigate asymmetric causality relationships between oil prices and real exchange rate variables. Causality relationships between oil prices and real exchange-rate series, and between positive and negative shocks of these series, are examined using the Fourier Toda–Yamamoto method. The results show no symmetric causality relationship between oil prices and real exchange rate variables. However, a one-way causality relationship is revealed from positive oil price shocks to positive real exchange rate shocks, indicating that an increase in oil prices causes an increase in the real exchange rate in Turkey. According to these results, asymmetric effects should be considered when examining the relationship between oil prices and exchange rates in Turkey.

Keywords: Real exchange rate; Oil prices; Asymmetric fourier Toda–Yamamoto causality test JEL Classification: C32; F31; Q43 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.26650/ISTJECON2021-1019608

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Handle: RePEc:ist:journl:v:71:y:2021:i:2:p:549-568