The relationship between inflation and exchange rate

Possible changes will occur in goods between countries in exchange rates , as well as services and capital flows, also on variables such as growth and inflation have serious effects . Today on foreign trade tariffs, quotas and so on. increasing disappearance of restrictions , monitoring system and to exchange rate policy of ensuring internal and external balances , as well as the protection of the external competitiveness of the economy has become a strategic policy tool. The main purpose of this study was to determine the relationship between exchange rate and inflation. In the study 1994:1-2014:12 has worked with the monthly data covering the period of years . These data are the nominal exchange rate and variable inflation. Inflation variable from Turkey 's Statistical Office , the nominal exchange rate of the Central Bank of the Republic of Turkey variable Electronic Data Delivery System (EDDS ) was obtained from. The study evaluated data it was determined that the increase in the nominal exchange rate affected inflation. Accordingly, the increase in foreign currency to fight inflation in Turkey will be in place policies to implement. Short- term currency movements to be kept under control by the central bank may emerge as an important measure for inflation. However, receipt of foreign direct investment and export -enhancing measures in the long term, can be counted among the most important measures in the fight against inflation. KEYWORDS: Currency , Inflation, Setup.