The analysis of the relationship between oil price fluctuations and Turkey's main macroeconomics indicators

The aim of this study is to analyze the relationship between Turkey's macroeconomic indicators and the fluctuations of oil prices. For this purpose, the relationship between oil price, inflation rate, interest rate, exchange rate, industrial production index, foreign trade volume, unemployment rate, current account balance and external debt stock are employed in this analysis. Traditioanl unit root tests, unit root with structual breaks, fourier unit root tests, cointegration tests with structual breaks and fourier causality tests are used to investigate the relation between oil price and macroeconomic indicators. Significant structural changes are observed in the aforementioned variables. According to the cointegration test results that allow structural changes, there is a long-run relationship between oil price and basic macroeconomic variables. Following the cointegration test the direction of this relationship has been tested via causality tests. Causality tests' findings are supportive of the argument that on oil prices have an impact on Turkey's macroeconomic variables. The empirical results suggest that policy makers should closely follow the oil market and encourage public and private investment decisions for alternative energy sources in the face of any shocks that may arise from this market.