The Relationship between the Exchange Rate, Interest Rate and Inflation: The Case of Turkey-Reference-Cited by-同舟云学术

The Relationship between the Exchange Rate, Interest Rate and Inflation: The Case of Turkey

Published:2020 Issue:2 Volume:67 Page:259-275
ISSN:2501-3165
Container-title:Scientific Annals of Economics and Business
language:en
Short-container-title:SAEB

Author:

Özen Ercan¹^ORCID,Özdemir Letife²,Grima Simon³

Affiliation:

1. University of Usak, Usak, Turkey; e-mail: ercan.ozen@usak.edu.tr

2. University of Afyonkocatepe, Afyonkarahisar, Turkey; e-mail: letifeozdemir@aku.edu.tr

3. University of Malta, Msida, Malta; e-mail: simon.grima@um.edu.mt.

Abstract

The purpose of the study is to measure the effects of changes in exchange rates and interest rates on inflation and to determine which of the exchange rates or interest rates has a greater impact on inflation rate following the July 15, 2016 coup attempt in Turkey. Our expectation is that similar to most authors is to find that there is a long-term relationship between the inflation rates and both the exchange rate and interest rates and that the effect of the exchange rate on the Producer Price Index (PPI) is greater than that of the interest rates. Moreover, we expect to find a unidirectional causality relationship between the Interest Rate of Commercial Banks Credit (IRBC), Over Night Interest Rate (O/N) and United States Dollar (USD) and the PPI, but not between the IRBC, O/N, USD and the Consumer Price Index (CPI).

Publisher

Editura Universitatii Alexandru Ioan Cuza din Iasi

Subject

General Economics, Econometrics and Finance,General Business, Management and Accounting

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