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Monetary policy, inflation, and exchange rate dynamics: evidence from the Turkish economy (2001-2023)

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  • Erick OKOTH

    (Sakarya University, Turkey)

Abstract

The concepts of interest rates, exchange rate and inflation have become key variables in ensuring economic balance both internally and externally. This study investigates the relationship between interest rate, exchange rate, and inflation in Türkiye over 2001-2023 using ARDL-ECM, FMOLS, and CCR methods. Secondary data from the Central Bank of Türkiye and the World Bank were used. Findings show that nominal interest rate is positively associated with inflation, exchange rate, economic growth, and unemployment. The study recommends a balance between accommodative monetary policies and financial stability to support sustainable long-term growth aimed at maintaining internal and external economic balance.

Suggested Citation

  • Erick OKOTH, 2025. "Monetary policy, inflation, and exchange rate dynamics: evidence from the Turkish economy (2001-2023)," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(643), S), pages 165-188, Summer.
    • Handle: RePEc:agr:journl:v:xxxii:y:2025:i:2(643):p:165-188
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    References listed on IDEAS

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    3. Hyoung-Seok Lim & Masao Ogaki, 2013. "A Theory of Exchange Rates and the Term Structure of Interest Rates," Review of Development Economics, Wiley Blackwell, vol. 17(1), pages 74-87, February.
    4. Eric Girard & Halil Kiymaz, 2009. "The Risk Factors Associated With Investing In An Emerging Equity Market During The Eu Membership Process," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 3(1), pages 1-17.
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