Abstract:

With globalization, the elimination of trade barriers between countries, changes in exchange rates have further increased their impact on national economies. One of the impacts of currencies in currencies on national economies is inflation. In literature, there are numerous empirical studies aimed at determining the transitional effect from exchange rate to price. These studies recognize that the positive and negative shock effects occurring in the variables are the same as in the cause tests they use. The difference that distinguishes this study from other causal studies in literature is that the causality between these shocks has been studied by distinguishing the positive and negative shocks that occur in the variables. In the current study, the transitional effect from exchange rate to price in Turkey Hatemi-J (2012) was studied with the help of the asymmetric causality test, and the test resulted; at the 5% significance level, from the positive component to the positive component to the positive component to the positive component to the positive component to the positive component to the positive component to the positive component to the positive component to the positive component to the positive component to the positive component to the positive component. In addition, To compare with the results obtained from the Hatemi-J asymmetric causality test, the Toda-Yamamoto causality test was also used. According to the findings obtained from the Toda-Yamamoto causality test, there is no transitional effect in Turkey from exchange rate to price.

Abstract:

Along with globalization, as trade barriers among countries have been removed, changes in exchange rates have further increased the impact on the domestic economies. One of the effects of movements in exchange rates appears in inflation rate.  In the literature, there are many empirical studies which have investigated the pass-through effects of the exchange rate on domestic prices. The causality tests used within the scope of the studies assume that the effects of the positive and negative shocks occurring in the variables are the same. The difference distinguishing this study from the other in the literature is that the current study investigates the possible causality among the shocks by separating the positive and negative shocks of the given variable.  In this study, Hatemi-J (2012) asymmetric causality test was used to investigate the exchange rate pass-through effect on the general price level in Turkey. At the end of the test; at the 5% significance level, a one-way asymmetric causality relationship was found between the positive USD component and the positive CPI component, the positive EURO component and the positive CPI component and also the positive EURO component and the positive USD component. Moreover, Toda-Yamamoto causality test has been utilized in order to compare with the results from Hatemi-J asymmetric causality test. According to findings of Toda-Yamamoto causality test, there is no exchange rate pass-through to prices effect in Turkey.

Keywords: