The Impact of the 2018 Crisis and Covid 19 Pandemic on Macroeconomic Indicators

Abstract

The aim of this study is to reveal the impact of both the increase in exchange rates and the Covid-19 pandemic on macroeconomic variables. For this purpose, the effects of exchange rate and the dummy variable, which are used to represent the Covid-19 pandemic, on the variables of unemployment rate, general level of prices, credit card expenditures, consumer confidence index and housing price index were analyzed by constructing five different econometric models. Model coefficients were estimated with the two-stage Engle-Granger method and Dynamic Ordinary Squares (DOLS) method. The relationships between the variables were examined by using quarterly data between 2014.I-2023.III. According to the analysis results, due to the increase in the exchange rate, the consumer confidence index has decreased, whereas the unemployment rate, general level of prices, housing prices and credit card expenditures have increased. The same results have been obtained for the period of Covid-19 pandemic. In addition, the response of relevant variables to shocks in the exchange rate was examined with the VAR model. According to the analysis results, while the unemployment rate, general level of prices, housing price index and credit card expenditures react positively to a 1 standard deviation shock in the exchange rate, the consumer confidence index reacts negatively. Therefore, the 2018 crisis and the Covid-19 pandemic have adverse effects on the Turkish economy.