Akademik Veri Yönetim Sistemi
Data Science, Machine Learning and Statistics 2019, Van, Türkiye, 26 Haziran - 29 Temmuz 2019, ss.1
The link between oil prices and exchange rates has been studied frequently. The motivation is to find dynamics, causality and predictability between the variables. The literature on Turkey, a heavily oil-import-dependent country, is rather thin and inconclusive. This study takes a comprehensive approach to examine the volatility effects between oil prices and exchange rates both in the short-run and in the long-run in Turkey. Additionally, the paper examines whether there is a causal relationship between oil prices and exchange rates and whether one can be explained using the other.
For this study, we used monthly time series oil prices and exchange rates data obtained from the Federal Reserve Bank of St Louis (FRED) and employed Granger causality test and Auto Regressive Distributed Lag (ARDL) approach that estimates both the short and the long run parameters. Our initial results indicate that there is one way Granger causality running from exchange rates to oil prices suggesting that exchange rates Granger causes oil prices in Turkey. ARDL results show that exchange rate movements affect oil prices in the long-run, but not in the short-run in Turkey. On the other hand, oil price changes do not have any impact on exchange rates both in the short-run and in the long-run as corresponding coefficients are not statistically significant.