An empirical application over the relationships between exchange rate,interest rate and inflation in Turkish economy

Exchange rate, interest rate and inflation are the ultimate macroeconomic variables which shape all the trrade relationships and the social and economic order and determine the welfare. As these variables have great importanle and interact each other in a verg complex structure ,it has almost been popular to investigate the causalities between them and to give the economic logic of the issue. In this study the causality relatianships are analyzed in individual manners which have two variables each case .In the first chapter the causality from exchange rate to interest rate is analyzed and it has been proved that these two variables each case. First of all ,the economic logic of the positive effect of exchange rate on interest rate and inflation has been analyzed .Then thenegative effelt of interest rate on exchange rate and inflation has been investigated. In the last theoretical part of the study, the positive Effect of inflation on interest rate and Exchange rate has been analyzed over the same logical framework. After investigating the theory of these variables, an econometric application has been conducted to Granger Causality Tests have been made over the monthly data of the period from 2010:1 to 2018:12 of Turkish Economy. The results of the application imply that there are significiant causalities from exchange rate to inflation and interest rate and from inflation to interest rate and exchange rate.