The effect of changes in crude oil prices on macroeconomic variables in Turkey

Petroleum is a product that is difficult to substitute, which provides one third of the world's energy needs, is used as a raw material in thousands of products, as a fuel in air, land and sea vehicles, and is in great demand. This demand makes oil an important commodity for both national economies and international economic and political relations. As a matter of fact, while having oil resources provides an important advantage, being deprived of these resources necessitates importing this p roduct. Unpredictable changes in the prices of oil, which has the potential to directly affect economic activity, cause slowdown in production, increase in unemployment, increase in prices and deterioration of foreign trade balances, leaving economies faced with major problems extending to the crisis. In line with these problems, the aim of this study is to understand the intricate relationship between oil prices and macroeconomic indicators and to investigate the macroeconomic effects of changes in oil prices in Turkey. For this purpose, the effects of oil price changes on the real sector (growth, unemployment and public expenditures), money market (inflation and interest) and foreign trade (foreign trade deficit and exchange rate), which constitute the general economic structure, are examined separately and in order to determine whether oil is an important policy for our country, seven hypotheses were created and these hypotheses were tested with Maki Cointegration, Toda Yamamoto causality, Hacker-Hatemi causality, Hatemi-J asymmetric causality and Hatemi-J time-varying asymmetric causality tests. The test results revealed that oil prices are cointegrated with the foreign trade deficit and public expenditures, and also significantly affect all the analyzed variables with various causality relationships. These results show that oil is an important commodity for the Turkish economy and an important policy input that should be taken into account when creating both monetary and fiscal policy.