Currency wars and their effects on the economy: An econometric analysis based on selected countries

The fact of currency wars, is very important in terms of the world economy and international trade. The main aim of currency wars, is tying to gain advantage by using exchange rate of the one country or countries as a vehicle. Especially when there is economic instability like war and crisis, countries have in interfered in currencies and have run to devaluation to make profit from foreign trade. Lots of countries are trying to set superiority an each other at foreing trade by thinking their international money value, they increase export quantity and decreased import quantity This study has focused on exchange rate, importance of exchange rate for country economy and matter of currency wars in the process from 1930s to nowadays. In the first two parts of the study, it is dwelled an exchange rate systems and currency wars; in last part (empirical practice), series comprising of annual exchange rate in 1985-2018 period, export and GDP datas of selected countries (USA and China) are used. Stability of series is analysed by ADF and DF-GL (ERS) unit root tests and when it is looked at difference of series, it is determined that they are stable. Therefore, ARDL bound testing approach has been used to search for long-term relationship between variables subjected of this study. According to the results of the test, it is determined that there is a long-term relationship between variables. In the first model which reciprocal trade between USA and China has been analyzed, it is concluded that the increase in exchange rate causes positive effects for China and negative effecets for USA. In the second model, which reciprocal trade between USA and China has been analyzed, although the decrease in China's national money value affets foreign trade, the increase in importation and exportation supply and demand flexibility causes meaningless results in relationship between variables. Keywords: Export, Import, Exchange Rate, Currency Wars, Globalısatıon