Effect of interest rate on exchange rate and inflation: The case of Turkey

It is very important to maintain macroeconomic balance in an economy. For this, the concepts of interest rate, exchange rate and inflation are important. In order for macroeconomic balance to be achieved, this triple balance must be realized. If this triple balance is disrupted, negative consequences arise in the economy. In order to eliminate these negative consequences, economic policies should be determined very well, the sources of the problems should be analyzed and rational policies should be implemented. When determining these policies, the situation of the country as well as the economic conjuncture of the world should be taken into consideration. Many factors affect macroeconomic balance. The globalizing world has also made the economy global. Topics such as relations between countries, wars, global epidemic crises, developing technology, changing production factors, and current voter preferences affect the economic situation of countries. Decision-making institutions in the economy should follow these topics rationally and act rationally when determining policies. The aim of this study is to examine the effects of interest rate, exchange rate and inflation on Turkey through these three concepts and make relevant evaluations. The years examined here were determined as between 2000 and 2018.