Abstract

In this research, the relationship between currency exchange rates and inflation in the context of Türkiye is investigated, covering the period 2006:Q1-2023:Q1. To achieve this objective, unit root tests on the variables are conducted using both Fourier KPSS and Standard KPSS methods. Additionally, Fourier SHIN and Standard SHIN cointegration tests are employed to determine the presence of a long-term connection between these variables. Furthermore, DOLS, FMOLS, and CCR estimators are utilized to estimate both long-term and short-term coefficients. The findings, which are obtained through all three estimation techniques, consistently indicate that increases in the exchange rate lead to higher inflation levels, whether in the long-term or the short-term. This result underscores the significant impact of exchange rates on inflation rates within the Türkiye economy. When Türkiye's economic structure is examined, it becomes evident that there is a substantial reliance on foreign exchange. This underscores the critical importance of maintaining exchange rate stability. Ultimately, the results emphasize the necessity of not only preserving exchange rate stability but also strengthening efforts to generate foreign exchange.

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