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Relationship Between Oil Prices and Real-Exchange Rate in Turkey: An Investigation Using Asymmetric Fourier Causality Analysis

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  • Fatma Kizilkaya

    (Malatya Turgut Ozal University, Faculty of Health Sciences, Malatya, Turkey)

Abstract

Oil-importing developing countries such as Turkey may be adversely affected by the increase in oil prices, which can raise production costs and the overall level of consumer prices. Increases in oil prices in international markets may also adversely affect the foreign trade balance of oil-importing countries. In this study, annual data for the period 1960–2019 in Turkey are used to investigate asymmetric causality relationships between oil prices and real exchange rate variables. Causality relationships between oil prices and real exchange-rate series, and between positive and negative shocks of these series, are examined using the Fourier Toda–Yamamoto method. The results show no symmetric causality relationship between oil prices and real exchange rate variables. However, a one-way causality relationship is revealed from positive oil price shocks to positive real exchange rate shocks, indicating that an increase in oil prices causes an increase in the real exchange rate in Turkey. According to these results, asymmetric effects should be considered when examining the relationship between oil prices and exchange rates in Turkey.

Suggested Citation

  • Fatma Kizilkaya, 2021. "Relationship Between Oil Prices and Real-Exchange Rate in Turkey: An Investigation Using Asymmetric Fourier Causality Analysis," Istanbul Journal of Economics-Istanbul Iktisat Dergisi, Istanbul University, Faculty of Economics, vol. 71(71-2), pages 549-568, December.
    • Handle: RePEc:ist:journl:v:71:y:2021:i:2:p:549-568
    DOI: 10.26650/ISTJECON2021-1019608
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    References listed on IDEAS

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    More about this item

    Keywords

    Real exchange rate; Oil prices; Asymmetric fourier Toda–Yamamoto causality test JEL Classification: C32 ; F31 ; Q43;
    All these keywords.

    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
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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