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Causal Relations among Macroeconomic Variables under Various Exchange Rate Levels: An Implementation of Threshold Vector Autoregression Model

Author

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  • Dilek Teker

    (Is k University, Faculty of Economics and Administrative Sciences, Turkey,)

  • Suat Teker

    (Is k University, Faculty of Economics and Administrative Sciences, Turkey,)

  • El in Aykac Alp

    (Istanbul Commerce University, Faculty of Business, Turkey)

Abstract

The paper examines interaction between selected macroeconomic determinants such as exchange rates, stock exchange market indexes, gold prices, money supply and inflation rates. Considering a nonlinear relationships in various macroeconomic indicators, a Threshold Vector Autoregression (TVAR) model is implemented. The data covers a period from 2003:01 to 2017:07. The results of the analysis points out the relationship between those macroeconomic indicators above and below the specific threshold value for exchange rate. The estimations indicate that policy maker may use monetary variables as policy variable for the stability of this system if they do not ignore the level of exchange rate.

Suggested Citation

  • Dilek Teker & Suat Teker & El in Aykac Alp, 2018. "Causal Relations among Macroeconomic Variables under Various Exchange Rate Levels: An Implementation of Threshold Vector Autoregression Model," International Journal of Economics and Financial Issues, Econjournals, vol. 8(4), pages 177-184.
    • Handle: RePEc:eco:journ1:2018-04-23
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    More about this item

    Keywords

    threshold vector autoregression model; exchange rate transmission;

    JEL classification:

    • 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
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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