Evaluation of the Effect of Oil Price Volatility on Exchange Rates: The Case of Türkiye

Öz

This study examines the dynamic relationship between oil prices and exchange rates, concentrating on the effects of various exchange rate regimes on this relationship. Previous research on the relationship between oil prices and exchange rates has been extensive; however, the effects of different exchange rate regimes have not been properly investigated. For instance, we utilize econometric techniques like Vector Autoregression (VAR) analysis, Augmented Dickey-Fuller (ADF), and Phillips-Perron (PP) unit root tests on Turkey that are highly reliant on the price of Brent crude oil. The findings indicate that exchange rate regimes have a significant impact on the long-term correlations between oil prices and exchange rates, as well as the volatility of these correlations. The analysis highlights how important it is for emerging nations' fiscal and monetary policymakers to consider these dynamics. Policymakers will benefit from a greater knowledge of these links as a result of this work, which will assist lessen the economic instability caused by fluctuations in oil prices. Additionally, the results imply that, in comparison to fixed regimes, flexible exchange rate regimes may provide greater resilience against shocks to the price of oil. This knowledge is especially helpful for developing nations looking to create more resilient economic strategies.

Anahtar Kelimeler

• Exchange Rate Regimes
• Oil Price Volatility
• Emerging Market Policy
• Turkey

Kaynakça

1. Abed, R.E., Amor, T.H., Nouira, R. and Rault, C. (2016). Asymmetric effect and dynamic relationships between oil price shocks and exchange rate volatility: Evidence from some selected MENA countries. Topics in Middle Eastern and African Economies, 18 (2).
2. Aggarwal, R., (1981). Exchange rates and stock prices: A study of the United States capital markets under floating exchange rates, Akron Business and Economic Review 12 (Fall), 7-12.
3. Akca, T. (2023). The causal relationship between transport inflation with oil prices and exchange rates. İktisat Politikası Araştırmaları Dergisi - Journal of Economic Policy Researches, 10(1), 245-260.
4. Albulescu,C.T. and Ajmi, A.N. (2021). Oil price and US dollar exchange rate: Change detection of bi-directional causal impact, Energy Economics, Volume 100, 105385.
5. Alper, C.E. and Torul, C. (2008), Oil prices, aggregate economic activity and global liquidity conditions: Evidence from Turkey. Economics Bulletin, 17(6), 1-8
6. Amano, R. A. and Van Norden, S. (1998). Exchange rates and oil prices. Review of International Economics, 6(4), 683-694.
7. Arouri, M. E and Julien, F (2009). On the short-term influence of oil price changes on stock markets in GCC countries: Linear and nonlinear analyses, Economics Bulletin 29(2), 795-804
8. Bénassy-Quéré, et al. (2007). Institutional determinants of foreign direct investment, The World Economy, 30(5):764–782. Blomberg, S. B. and Harris, E. S. (1995). The commodity-consumer price connection: fact or fable? Economic Policy Review 1(3

9. Buetzer, S., Habib, M. M., and Stracca, L. (2016). Global exchange rate configurations: Do oil shocks matter? IMF Economic Review, 64, 443-470.
10. Burbridge, J. and Harrison, A. (1984). Testing for the effects of oil-price rises using vector autoregressions, International Economic Review 25, 459-484.
11. Chen, S.S. and Chen, H.C. (2007). Oil prices and real exchange rates. Energy Economics, 29, 390-40
12. Chen, Y.C., Rogoff, K.S. and Rossi, B. (2010). Can exchange rates forecast commodity prices? Q J Econ 125(3):1145–1194
13. Çelik, D., (2023). Examination of the impact of exchange rate and petroleum prices on inflation with the VECM model: The case of Turkey. BILTURK, The Journal of Economics and Related Studies, 5(3), 154-166.
14. Dawson, C. (2004). The effect of oil prices on exchange rate: A case study of the Dominican Republic. The Park Place Economist 14(1): 23-30.
15. Eryigit, M. (2012), The dynamic relationship between oil price shocks and selected macroeconomic variables in Turkey. Economic Research Ekonomska Istraživanja, 25(2), 263-276.
16. Gökçe, A. (2013), The dynamic impacts of oil price shocks on Turkey’s economic growth. Journal of Economics and Sustainable Development, 4(8), 181-192
17. Fin24 (2022). At current oil prices, petrol and diesel are due for massive hikes in April. News24. Johannesburg, News24.
18. Gavin, M. (1989) The stock market and exchange rate dynamics. Journal of International Money and Finance, 8, 181-200
19. Gilbert, C.L. (2010), How to understand high food prices. Journal of Agricultural Economics, 61(2), 398-425.
20. Gisser, M. and Goodwin, T.H. (1986). Crude oil and the macroeconomy: Tests of some popular notions, Journal of Money Credit and Banking 18, 95-103.
21. Gogineni, S. (2007). The stock market reaction to oil price changes, Working Paper, University of Oklahoma
22. Golub, S. (1983). Oil prices and exchange rates. The Economic Journal, 93, 576-593.
23. Hamilton J. D. (1983). Oil and the macroeconomy since World War II, Journal of Political Economy 92, 228-248.
24. Huang, B.N., Lee, C.C., Chang, Y.F., Lee, C.C. (2021), Dynamic linkage between oil prices and exchange rates: New global evidence. Empirical Economics, 61, 719-742.
25. Husain, A.M., Mody, A. and Rogoff, K.S. (2005). Exchange rate regime durability and performance in developing versus advanced economies, Journal of Monetary Economics, 52(1): 35-64.
26. Huseynli, N. (2023). The effect of world oil price on türkiye’s exchange rate, International Journal of Energy Economics and Policy, Econjournals, 13(6): 304-310
27. Kilian, J and Park, C (2009). The impact of oil price shocks on The U.S. stock market, International Economic Review, 50(4), 1267-1287.
28. Kisswani, K.M., Harraf, A., Kisswani, A.M. (2019), Revisiting the effects of oil prices on exchange rate: Asymmetric evidence from the ASEAN-5 countries. Economic Change and Restructuring, 52, 279-300.
29. Krugman, P. (1983). Oil and the Dollar, NBER Working Papers 0554.
30. Lin, C. C., Fang, C. R. and Cheng, H. P. (2010). Relationships between oil price shocks and stock market: an empirical analysis from the Greater China, China Economic Journal 3(3), 241-254 Lizardo, R. A. and Mollick, A.V. (2010). Oil price fluctuations and U.S. dollar exchange rates, Energy Economics, 32(2), pages 399-408.
31. Madura, J. (2008). International Financial Management (9th ed.). Ohio: Cengage Learning.
32. Narayan, P.K., Narayan, S. and Prasad, A. (2008). understanding the oil price-exchange rate nexus for the Fiji Islands. Energy Economics, 30(5):2686-2696.
33. Narayan, P.K. and Narayan, S. (2010). Modelling the impact of oil prices on Vietnam’s Stock Prices, Applied Energy 87, 356-361.
34. Nazlioglu, S., Soytas, U. (2012), Oil price, agricultural commodity prices, and the dollar: A panel cointegration and causality analysis. Energy Economics, 34(4), 1098-1104.
35. Nieh, C. C. And Lee, C. F. (2001). Dynamic Relationship Between Stock Prices and Exchange Rates for G-7 Countries, The Quarterly Review of Economics and Finance 41, pp. 477–490.
36. Nkomo, J. C. (2009). Energy security and liquid fuels in South Africa. Journal of Energy in Southern Africa 20(1): 20-24.
37. Oriavwote, V. E. and Eriemo, N. O. (2012). Oil prices and the real exchange rate in Nigeria. International Journal of Economics and Finance 4(6): 198-205.
38. Ozair, A. (2006). Causality between stock prices and exchange rates: a case of the United States, Florida Atlantic University, Master of Science Thesis.
39. Ozturk, F. (2015), Oil price shocks-macro economy relationship in Turkey. Asian Economic and Financial Review, 5(5), 846-857.
40. Park, J. and Ratti, R. A. (2008). Oil price shock markets in the U.S. and 13 European Countries, Energy Economics 30, 2587-2608.
41. Reboredo, J. C. (2012). Modelling oil price and exchange rate co-movements. Journal of Policy Modeling 34(3): 419-440.
42. Sadorsky, P. (2001). Risk factors in stock returns of Canadian oil and gas companies, Energy Economics 23, 17-28.
43. Sevuktekin, M. and Nargelecekenler, M. (2007). Turkiye'de IMKB ve doviz kuru arasindaki dinamik ilişkinin belirlenmesi, 8. Turkiye Ekonometri ve Istatistik Kongresi, Inonu Universitesi, Malatya.
44. Shakibaei, A., et al. (2009). The survey of a long-run relationship between oil prices and exchange rates: the case of OPEC.
45. Tsoukalas, D. (2003). Macroeconomic factors and stock prices in the emerging Cypriot equity market, Managerial Finance 29(4): 87-92.
46. Yurtsever, C. and Zahor, T. (2007). Oil price shocks and stock market in the Netherlands, Working Paper, University of Groningen.