The Relationship Between Real Exchange Rate, Interest Rate And Current Account Deficit in the Context of Financial Crises: The Case of Turkey
The Relationship Between Real Exchange Rate, Interest Rate And Current Account Deficit in the Context of Financial Crises: The Case of Turkey
Keywords:
Financial Crises, Exchange Rate, Interest Rate, Current Account Deficit, Causality AnalysisAbstract
Beginning after the Second World War, with the acceleration of the international financial integration process in the 1990s, the concept of financial crisis emerged with the integration of national and international financial markets. Domestic and foreign financial liberalization initiatives, which are carried out by ignoring the tendency of liberalization and opening up in developed and developing countries and macroeconomic instability, cause financial crises. The instability in the financial markets, which affects the country's economy and companies with its microeconomic dimension, in terms of macroeconomic indicators (exchange rate, interest rate, etc.) of unexpected events in the economy leads to instability in international financial markets and financial and real crises. In this study it is aimed to examine with Nazlioglu et al. (2016) Fourier Toda-Yamamoto causality analysis and Enders and Jones (2016) Fourier Granger causality analysis for the period 1990-2019 of Turkey within the framework of financial crises, the relationship between the current account deficit/GDP as an indicator of low-frequency banking crisis as an indicator of financial crises, the indicator of high-frequency banking crises and the real exchange rate, which is the buying and selling value of foreign currencies, and an indicator of the value of national currency in financial markets and the interest rate. In line with the findings of the Nazlioglu et al. (2016) Fourier Toda-Yamamoto causality analysis and Enders and Jones (2016) Fourier Granger causality analyzes, it was found that there is a one-way causality relationship from interest rates to exchange rates, from interest rates to current account deficit, and from exchange rates to current account deficit.
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