Investigation of the impact of exchange ratevolatility on inflation and unemployment in Turkey

Exchange rate volatility is considered an important factor affecting the stability of an economy. Inflation and unemployment rates are among the basic indicators of economic performance, and it is stated that fluctuations in exchange rates can have significant effects on these indicators. It is emphasized that the effects of exchange rate volatility on inflation and unemployment are more pronounced, especially in developing economies. In this context, the aim of this study is to examine the relationship between inflation, unemployment, and exchange rate volatility in Turkey. The research was carried out using literature review and econometric analysis methods. The data sets used are sourced from the Central Bank of the Republic of Turkey (TCMB) and cover quarterly data for the period 2014-2023. The relationship between the variables was evaluated with the help of time series analysis and regression models. The results indicate that exchange rate volatility has a positive impact on inflation, suggesting that fluctuations in exchange rates tend to increase inflation. The relationship between unemployment and exchange rate volatility presents a more complex structure, with positive effects observed during certain periods and negative effects in others. This indicates that unemployment may vary not only in response to exchange rate volatility but also in relation to other macroeconomic variables. The findings obtained from the causality analysis reveal that money supply, real exchange rate and exchange rate volatility are determinants of inflation. However, no significant finding has been reached regarding the relationship between exchange rate and exchange rate volatility and unemployment