The relationship between crude oil prices and exchange rate in Turkey: An empirical analysis

After the first oil shock in 1973 which shook the world economy, the attention of everyone turned to the oil prices. Changes in oil prices began to be followed closely, and its effects over macroeconomic variables started to be researched. Today, there is an important literature about this subject. Because the pricing of crude oil is made in American dollars internationally, changes in oil price directly affect the exchange rates of the countries. This point especially led the researches about the effects of oil price changes to focus on its effects over exchange rates. The studies about the effects of oil price on exchange rate shows that in general, oil price increase leads dollar to appreciate in oilexporting countries and to depreciate in oil-importing countries. When we follow the price of the crude oil and exchange rate of the dollar nowadays, we see a pattern not so different from the general conclusion of the literature about the relationship between oil price and exchange rate in Turkey. In this study, the relationship between the crude oil price and exchange rate of dollar in Turkey will be analyzed for the period of 2001:01-2015:02 via 3 monthly data. Our expectation from this study, in which the time series methods will be used, is that the results to be in line with earlier studies which point to an asymmetrical relationship between oil price and exchange rate.