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

Authors : Çağatay Tunçsiper

Pages : 213-226

Doi:10.59445/ijephss.1494368

View : 46 | Download : 42

Publication Date : 2024-07-15

Article Type : Research Paper

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