The Relationship between Exchange Rate and Inflation: An Empirical Study of Turkey
This paper investigates the relationship between inflation and exchange rate in Turkey. Unlike many empirical studies which make use of the US and Turkey inflation data to test the relationship between inflation and exchange rate in Turkey, this paper employed inflation data of Turkey and the Unite...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
EconJournals
2016-10-01
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| Series: | International Journal of Economics and Financial Issues |
| Online Access: | https://econjournals.com/index.php/ijefi/article/view/2819 |
| _version_ | 1797918227383189504 |
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| author | Abderezak Ali Abdurehman Samet Hacilar |
| author_facet | Abderezak Ali Abdurehman Samet Hacilar |
| author_sort | Abderezak Ali Abdurehman |
| collection | DOAJ |
| description |
This paper investigates the relationship between inflation and exchange rate in Turkey. Unlike many empirical studies which make use of the US and Turkey inflation data to test the relationship between inflation and exchange rate in Turkey, this paper employed inflation data of Turkey and the United Kingdom. An OLS regression and a simple GARCH model were used to understand the relationship between inflation and exchange rate. The results obtained from OLS regression indicate Purchasing Power Parity (PPP) does not exist in Turkey. However, the existence of ARCH and GARCH in the relationship indicates that the deviations from PPP are not random and follow a certain pattern. Therefore, we conclude that the deviation of PPP might be attributed to certain factors such as transaction cost, government restriction, product specialization or other related factors.
Keywords: Exchange Rate, Inflation, GARCH model
JEL Classifications: C87; E31; F31 |
| first_indexed | 2024-04-10T13:26:00Z |
| format | Article |
| id | doaj.art-9f476509f9954599bf1dfd4540002f5b |
| institution | Directory Open Access Journal |
| issn | 2146-4138 |
| language | English |
| last_indexed | 2024-04-10T13:26:00Z |
| publishDate | 2016-10-01 |
| publisher | EconJournals |
| record_format | Article |
| series | International Journal of Economics and Financial Issues |
| spelling | doaj.art-9f476509f9954599bf1dfd4540002f5b2023-02-15T16:11:51ZengEconJournalsInternational Journal of Economics and Financial Issues2146-41382016-10-0164The Relationship between Exchange Rate and Inflation: An Empirical Study of TurkeyAbderezak Ali Abdurehman0Samet Hacilar1Yıldırım Beyazit UniversityTechnological Research Council of Turkey (TÜBİTAK) This paper investigates the relationship between inflation and exchange rate in Turkey. Unlike many empirical studies which make use of the US and Turkey inflation data to test the relationship between inflation and exchange rate in Turkey, this paper employed inflation data of Turkey and the United Kingdom. An OLS regression and a simple GARCH model were used to understand the relationship between inflation and exchange rate. The results obtained from OLS regression indicate Purchasing Power Parity (PPP) does not exist in Turkey. However, the existence of ARCH and GARCH in the relationship indicates that the deviations from PPP are not random and follow a certain pattern. Therefore, we conclude that the deviation of PPP might be attributed to certain factors such as transaction cost, government restriction, product specialization or other related factors. Keywords: Exchange Rate, Inflation, GARCH model JEL Classifications: C87; E31; F31https://econjournals.com/index.php/ijefi/article/view/2819 |
| spellingShingle | Abderezak Ali Abdurehman Samet Hacilar The Relationship between Exchange Rate and Inflation: An Empirical Study of Turkey International Journal of Economics and Financial Issues |
| title | The Relationship between Exchange Rate and Inflation: An Empirical Study of Turkey |
| title_full | The Relationship between Exchange Rate and Inflation: An Empirical Study of Turkey |
| title_fullStr | The Relationship between Exchange Rate and Inflation: An Empirical Study of Turkey |
| title_full_unstemmed | The Relationship between Exchange Rate and Inflation: An Empirical Study of Turkey |
| title_short | The Relationship between Exchange Rate and Inflation: An Empirical Study of Turkey |
| title_sort | relationship between exchange rate and inflation an empirical study of turkey |
| url | https://econjournals.com/index.php/ijefi/article/view/2819 |
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