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.
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References
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