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Do Monetary Policy Measures Affect Foreign Exchange Rates during the COVID-19 Pandemic? Evidence from Turkey

Author

Listed:
  • Mustafa Tevfik KARTAL
  • Özer DEPREN
  • Serpil KILIC DEPREN

Abstract

The study examines how foreign exchange (FX) rates in Turkey are affected by the pandemic considering the impacts of monetary policy responses to the pandemic. Selected FX rates are examined by using 10 independent variables containing monetary policy indicators and the pandemic figures. In this context, daily data from February 1, 2019 to August 31, 2020 that consists of the pre-pandemic and the pandemic periods are considered and machine learning algorithms are applied. The findings reveal that the pandemic and monetary policy indicators have a statistically significant and high effect on the FX rates, and the influence of independent factors on the FX rates vary according to the periods. According to the results of the study, it is emphasized the importance of the pandemic and monetary policy measures on the FX rates because monetary policy indicators have a statistically significant and high impact on the FX rates in Turkey for the pandemic period.

Suggested Citation

  • Mustafa Tevfik KARTAL & Özer DEPREN & Serpil KILIC DEPREN, 2021. "Do Monetary Policy Measures Affect Foreign Exchange Rates during the COVID-19 Pandemic? Evidence from Turkey," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 15(2), pages 175-202.
    • Handle: RePEc:bdd:journl:v:15:y:2021:i:2:p:175-202
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    Cited by:

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    2. Mustafa Tevfik KARTAL, 2022. "The Role of Macroeconomic and Market Indicators in Explaining Sovereign Credit Default Swaps (CDS) Spread Changes: Evidence from Türkiye," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 145-164, April.
    3. Kılıç Depren, Serpil & Kartal, Mustafa Tevfik & Ertuğrul, Hasan Murat & Depren, Özer, 2022. "The role of data frequency and method selection in electricity price estimation: Comparative evidence from Turkey in pre-pandemic and pandemic periods," Renewable Energy, Elsevier, vol. 186(C), pages 217-225.

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    More about this item

    Keywords

    FX rates; Machine learning algorithms; Monetary policy; Turkey.;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C39 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Other
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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