THE IMPACT OF EXCHANGE RATE VOLATILITY ON ECONOMIC GROWTH

Abstract

The exchange rate is a complex factor that affects the economic progress of a country. It is an important component of international trade, directly affecting export and import costs, and economic growth. In this article, we examine the impact of exchange rate changes on economic growth in Türkiye from a Keynesian perspective. Using quarterly data for the period 1998-2023, we set an empirical model. By rigorously analyzing real exchange rate data, we evaluate the output response with statistical techniques such as the ARDL bound test. Our research reveals that public spending, credit to the private sector and terms of trade positively affect real gross domestic product (GDP). On the other hand, the effect of changes in the real exchange rate on GDP is not statistically significant. Based on those results, an increase in public expenditures and credit support to the private sector to stimulate economic growth. Additionally, appropriate policy measures should be taken to ensure exchange rate stability and prevent fluctuations.

Keywords

• Exchange rate volatility
• Economic growth
• Turkish economy

DÖVİZ KURU OYNAKLIĞININ EKONOMİK BÜYÜME ÜZERİNDEKİ ETKİSİ

Abstract

Döviz kuru, bir ülkenin ekonomik ilerlemesini etkileyen karmaşık bir faktördür. Uluslararası ticaretin önemli bir bileşenidir, ihracat ve ithalat maliyetlerini ve ekonomik büyümeyi doğrudan etkiler. Bu makalede, Türkiye’de döviz kuru değişimlerinin ekonomik büyüme üzerindeki etkisi Keynesyen bir bakış açısıyla incelenmektedir. 1998-2023 dönemi için üçer aylık veriler kullanılarak ampirik bir model kurulmuştur. Reel döviz kuru verilerini titizlikle analiz ederek, ARDL sınır testi gibi istatistiksel tekniklerle çıktı tepkisini değerlendiriyoruz. Araştırmamız kamu harcamalarının, özel sektöre verilen kredilerin ve ticaret hadlerinin reel gayri safi yurtiçi hasılayı (GSYH) pozitif yönde etkilediğini ortaya koymaktadır. Öte yandan, reel döviz kurundaki değişikliklerin GSYİH üzerindeki etkisi istatistiksel olarak anlamlı değildir. Bu sonuçlara göre, ekonomik büyümeyi canlandırmak için kamu harcamalarının artırılması ve özel sektöre kredi desteği sağlanması gerekmektedir. Ayrıca, döviz kuru istikrarını sağlamak ve dalgalanmaları önlemek için uygun politika önlemleri alınmalıdır.

Keywords

• Döviz kuru oynaklığı
• Ekonomik büyüme
• Türkiye ekonomisi

References

1. • Atkins, Fiona (2000), “Revisiting the exchange rate debate: The Jamaican experience”, Journal of International Development, Vol. 12, no: 1, pp. 121-131.
2. • Azid, Toseef & Jamil, Muhammad & Kousar, Aneela (2005), “Impact of exchange rate volatility on growth and economic performance: A case study of Pakistan, 1973-2003”, Pakistan Development Review, Vol. 44, no: 4 (Part II), pp. 749-772.
3. • Barguellil, Achouak & Ben-Salha, Ousama & Zmami, Mourad (2018), “Exchange Rate Volatility and Economic Growth”, Journal of Economic Integration, Vol. 33, no: 2, pp. 1302-1336.
4. • Dickey, David A., & Fuller, Wayne A. (1979), “Distribution of the Estimators for Autoregressive Time Series with a Unit Root”, Journal of the American Statistical Association, Vol. 74, no: 366, pp. 427-431.
5. • Economics Help, “Fiscal stance”, Date of Accession: 15.01.2024 from https://www.economicshelp.org/blog/glossary/fiscal-stance/.
6. • Edwards, Sebastian (1986), “Are Devaluations Contractionary?”, The Review of Economics and Statistics, Vol. 68, no: 3, pp. 501-508.
7. • Herranz, Edward (2017), “Unit root tests”, WIREs Computational Statistics, Vol. 9, no: 3, e1396, pp. 1-20.
8. • IMF (1995), Guidelines for Fiscal Adjustment, Fiscal Affairs Department, INTERNATIONAL MONETARY FUND, no: 49, Date of Accession: 10.01.2024 from https://www.imf.org/external/pubs/ft/pam/pam49/pam49.pdf.

9. • Janus, Thorsten & Riera-Crichton, Daniel (2015), “Real Exchange Rate Volatility, Economic Growth and the Euro”, Journal of Economic Integration, Vol. 30, no: 1, pp. 148-171.
10. • Jawaid, Tehseen & Waheed, Abdul (2011), “Effects of Terms of Trade and its Volatility on Economic Growth: A Cross Country Empirical Investigation”, Transition Studies Review, Vol. 18, no: 2, pp. 217-229.
11. • Morina, Fatbardha & Hysa, Eglantina & Ergün, Uğur & Panait, Mirela & Voica, Marian Catalin (2020), “The Effect of Exchange Rate Volatility on Economic Growth: Case of the CEE Countries”, Journal of Risk and Financial Management, Vol. 13, no: 8, Article 8.
12. • Ojaghlou, Mortaza (2019), “Tourism-Led Growth and Risk of the Dutch Disease: Dutch Disease in Turkey”, International Business Research, Vol. 12, no: 7, p. 103.
13. • Ojaghlou, Mortaza (2020), “Dynamic Effects of Macroeconomic Fundamentals on Stock Market Movements: An Empirical Evidence from Istanbul Stock Market”, Bulletin of Economic Theory and Analysis, Vol 5, no: 2, pp. 17-36.
14. • Ozata, Erkan (2020), “The effect of exchange rate volatility on economic growth in Turkey”, Pressacademia, Vol. 9, no: 1, pp. 42-51.
15. • Pesaran, M. Hashem & Shin, Yongcheol & Smith, Richard J. (2001), “Bounds testing approaches to the analysis of level relationships”, Journal of Applied Econometrics, Vol. 16, no: 3, pp. 289-326.
16. • Phillips, Peter C. B., & Perron, Pierre (1988), “Testing for a Unit Root in Time Series Regression”, Biometrika, Vol. 75, no: 2, pp. 335-346.
17. • Razzaque, Mohammad A. & Bidisha, Sayema Haque & Khondker, Bazlul Haque (2017), “Exchange Rate and Economic Growth: An Empirical Assessment for Bangladesh”, Journal of South Asian Development, Vol. 12, no: 1, pp. 42-64.
18. • Rhodd, R. T. G. (1993), “The effect of real exchange rate changes on output: Jamaica’s devaluation experience”, Journal of International Development, Vol. 5, no: 3, pp. 291-303.
19. • Witter, Michael (1983), “Exchange Rate Policy in Jamaica: A Critical Assessment”, Social and Economic Studies, Vol. 32, no: 4, pp. 1-50.
20. • Wolters, Jürgen & Hassler, Uwe (2006), “Unit Root Testing”, in O. Hübler & J. Frohn (eds.) Modern Econometric Analysis: Surveys on Recent Developments, Heidelberg: Springer Berlin, pp. 41-56.
21. • Yensu, Joseph & Nkrumah, Seth Kofi & Amankwah, Samuel & Ledi, Klenam Korbla (2022), “The effect of exchange rate volatility on economic growth”, Risk Governance and Control: Financial Markets & Institutions, Vol. 12, no: 4, pp. 33-45.