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

Year 2024, Volume: 7 Issue: 3, 213 - 226, 15.07.2024

Çağatay Tunçsiper

https://doi.org/10.59445/ijephss.1494368

Abstract

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.

Keywords

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

Ethical Statement

It is declared that scientific and ethical principles have been followed while carrying out and writing this study and that all the sources used have been properly cited.

Supporting Institution

This research received no specific grant from any funding agency in the public, commercial, or not-for-profit sectors.

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