Effect of exchange rate on macro-economic indicators: Example of Turkey

Exchange rate is one of the most fundamental economic indicators of the country economies, and at the same time has a close relationship with some other macro economic aggregates such as interest rates, inflation, currenct account deficit, unemployment and gross domestic product. In this sense, the movements suddenly occurred and unexpected by the market structures are able to create important problems in the economy and lead to instabilities on other economic indicators. Especially, the recent years witness that the relationship between inflation and exchange rate mainly stemmed from excess exchange rate volatility has been one of the mostly interested areas for both politicians and policy makers and the ordinary citizens. In this respect, that the exchange rate has a stable and foreseeable framework and that its effects on other economic aggregates can be measured have a crucial impact for the country economy. In our thesis study, the effects of exchange rate on some other main macro economic indicators in this way have been tried to be examined. For this purpose, by also utilising the developments in contemporaneous economics literature the content of theoretical based knowledges has been followed, and the effects of exchange rate on the economy have been investigated in an empirical way with time series analyses.As a result of our findings, it has been observed that positive exchange rate scooks have significant effects on other macro economic variables.