ASYMMETRIC AND STRUCTURAL EFFECTS OF EXCHANGE RATE, INFLATION AND FUNDING COSTS ON CBRT RESERVES
Abstract
The reserves of the Central Bank of the Republic of Turkey (CBRT) showed a marked downward trend between 2013 and 2020 due to economic, political, and global developments. In particular, reserves fell to historic lows in 2020, but showed signs of partial recovery in the following periods. These developments attracted the attention of both the public and academic circles, and debates over reserves intensified. In this study, using monthly data for the period January 2015–May 2025, the asymmetric effects of the producer price index, weighted average funding cost, and exchange rate on CBRT reserves were examined. The stationarity levels of the variables were tested using Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests, as well as Zivot-Andrews unit root tests while accounting for structural breaks. After ensuring stationarity conditions, the NARDL cointegration method was applied to identify asymmetric long-term relationships. The findings indicate that the macroeconomic variables examined have statistically significant and asymmetric effects on CBRT reserves in both the short and long term. It was found that positive and negative shocks have different effects on reserves in the short term, while in the long term, increases in the exchange rate and inflation reduce reserves, whereas decreases increase them. Furthermore, while increases in funding costs have a negative and statistically significant effect on reserves, decreases in funding costs do not have a statistically significant effect. Overall, the results suggest that CBRT reserves are shaped not only by responses to short-term shocks but also by long-term structural factors.
Keywords
Central Bank Reserves, Exchange Rate, NARDL Bound Test, Structural Break
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