The effect of expected inflation on dollarization: Turkey example

In this study, the relationship between expected inflation, exchange rate and financial dollarization rate is examined, starting from the deposit dollarization, which has been over 50% in recent years. In this context, the VAR model is established by using a total of 105 monthly data between the years 2013-2021 for the 3 variables in question and the causality relationship between the variables is examined. According to the results obtained from the study, it has been observed that there is a causality relationship between the variables and there is no long-term relationship. The results of the granger causality test show that the change in exchange rate causes dollarization, dollarization causes an increase in inflation expectation, and there is a bidirectional causality relationship between exchange rate and inflation expectation.