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Foreign Exchange Rate Effect on Household Consumption Tendency: The Turkish Case

Author

Listed:
  • Elçin Aykaç Alp

    (Istanbul Commerce University)

  • Ali Osman Gürbüz

    (Istanbul Commerce University)

Abstract

In this study, the relationship between the exchange rate and the consumer price index and the effect of the relationship on the price movements of the product groups were examined in Turkey for the period between 2003:01-2019:04. The direction and degree of impact differ in terms of periods. For this reason, both the entire period and the five-year periods are subjected to analysis. The method of analysis as 394 items, 12 commodity groups for the five-years period by calculating correlations with the dollar, euro and currency basket was examined in terms of direction and impact of the relationship is analyzed. For the same periods, the relationship between the exchange rates and the CPI was also analyzed with VAR models. This method helps to determine the direction and the impact of this relationship and also it shows how long the effect lasted.

Suggested Citation

  • Elçin Aykaç Alp & Ali Osman Gürbüz, 2020. "Foreign Exchange Rate Effect on Household Consumption Tendency: The Turkish Case," Journal of Finance Letters (Maliye ve Finans Yazıları), Maliye ve Finans Yazıları Yayıncılık Ltd. Şti., vol. 35(114), pages 263-294, October.
    • Handle: RePEc:acc:malfin:v:35:y:2020:i:114:p:263-294
    DOI: https://doi.org/10.33203/mfy.694941
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    More about this item

    Keywords

    Net Exchange Rate; CPI; exchange rate pass-through;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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