Title: The effects of COVID-19 pandemic on the exchange rate: an empirical analysis for Turkey as an emerging economy

Authors: Fatih Ayhan

Addresses: Faculty of Economics and Administrative Sciences, Department of Economics, Bandirma Onyedi Eylul University, Balikesir, 10200, Turkey; Economic Research Center (WCERC), Western Caspian University, Baku, Azerbaijan

Abstract: The COVID-19 pandemic has deeply affected all economies, especially the macroeconomic indicators of developing countries. There have also been changes in all economic indicators in Turkish economy since COVID-19 cases appeared in March 2020. The USD/TRY exchange rate (EXC) also fluctuated in this period. In this study, the determinants of the USD/TRY exchange rate were empirically tested for 11/03/2020-06/11/2020 when the cases of COVID-19 increased. This research investigated the relationship between the daily number of COVID-19 cases (COVID), oil prices (OIL), and gold prices (GOLD) in Turkey. The findings of the residual augmented least squares (RALS) regression model showed that COVID, GOLD, and OIL have a statistically significant and negative effect on EXC. According to the regression model results, the increase in the COVID, GOLD, and OIL variables decrease the USD/TRY exchange rate, respectively. The most influential factor in determining the USD/TRY appears to be the rate of oil prices during the pandemic period. The most effective tool for policymakers to control exchange rate volatility seems to seek solutions for oil and energy prices.

Keywords: exchange rate; oil prices; COVID-19; RALS; residual augmented least squares; Turkish economy.

DOI: 10.1504/IJMEF.2024.144104

International Journal of Monetary Economics and Finance, 2024 Vol.17 No.5, pp.354 - 375

Received: 27 Aug 2021
Accepted: 02 Feb 2022
Published online: 28 Jan 2025 *

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