Do Oil Prices Still Matter for Macroeconomic Performance? An ARDL Model for Turkey

Year 2023, Volume: 8 Issue: 2, 279 - 300, 30.12.2023

Hülya Deniz Karakoyun , Ferda Karagöz Özenç

Abstract

Understanding the effect of oil price swings on macroeconomic performance is decisive in the analysis for policy makers. This need has made it necessary to conduct sophisticated investigations for researchers since the first OPEC embargo. Analyses that focused on the traditional linear relationship between oil price changes and macroeconomic performance were followed by nonlinear and asymmetrical analyses, as well as ARDL methods, both in developed and developing countries in recent years. To that end, this study aims to investigate the existence of a long-run and short-run relationship between oil prices and economic growth, proxied by industrial production index, consumer price index, and real exchange rates applying ARDL cointegration analysis to monthly data for the 2001:07 and 2023:05 period in Turkey. Results of our empirical model show that industrial production is positively related to oil prices between 2001:07 and 2017:08. However, the relationship between real oil prices and the industraial production index shifts a negative correlation from 2017:09 to 2023:05.

Keywords

Oil price, ARDL bounding test, real exchange rate, industrial production, Turkey

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