The Impact of Bank and Credit Card Expenditures on Real Exchange Rate in Turkey: VAR Analysis and Toda-Yamamoto Causality Test

Exchange rate has become an important determinant in the macroeconomic area especially with the increasing globalization tendency. In this sense, it is very important to determine the factors that affect the formation or change of exchange rates and to follow exchange rate policies accordingly. The aim of this study is to investigate the relationship between bank and credit card expenditure amounts, and real exchange rates. In this context, according to the findings of the studies on exchange rate, other independent variables that affect the real exchange rate the most were included in the model. In the study; while the inflation rates (CPI, annual % change), the Central Bank's foreign-exchange reserves, M2 money supply, unemployment rate, the Central Bank of the Republic of Turkey (CBRT) average funding cost as proxy for interest rate, bank and credit card expenditure amounts are used as independent variables while real effective exchange rate based on CPI is used as the dependent variable. All data are obtained from the CBRT Electronic Data Distribution System. Monthly data of the identified variables covering the period 2014:3-2019:5 are used in the study. The study is mainly based on time series analysis. In this sense, stationarity degrees of the variables are determined by using Augmented Dickey-Fuller Test. Then, ARDL Bound Test analysis is performed and it is concluded that there is no long-run relationship between real effective exchange rate and independent variables used in the model. Then, appropriate lag length of the model is determined and the short-run relationship between the variables is investigated by using Toda-Yamamoto Causality Test. After determining that the variables have an impact on each other, the relationship between variables is examined in more detail by using VAR analysis. As a result of the study, one-way relationship from card expenditures to real exchange rate is determined. However, there is no direct causality from exchange rate to card expenditures. The results obtained in the study are consistent with previous studies. Furthermore, this study differentiates from the previous studies in terms of investigating the short-run and the long-run relationship between real exchange rate and, bank and credit card expenditures in Turkey and it contributes to the literature on this aspect.