The exchange rate and the interest rate relationship have been the focus of attention for many years in the world economy. Especially as most countries adopt a floating exchange rate system and on the other hand interest rates are a very influential variable on the economy especially affecting investments which provided an important development in the increase of interest. As a natural consequence of these developments, the volatility spread effect between the exchange rate and the interest rate has been the subject of many field work for years. Studies on this subject have often produced contradictory results, especially in time series analysis, and no common result has been achieved. In order to contribute to the literatüre ın this study, volatility spread effect between exchange rate and interest rate in Turkey is examined with threshold value ARCH (TARCH) analysis. Between 04.01.2002 and 21.04.2017, weekly frekans were selected as the working period. According to the results of the unit root tests performed, the interest rate was stable at the variable level and the exchange rate was stable at the first difference. TARCH results indicate that interest rate volatility increases exchange rate volatility.
Exchange Rate, Interest Rate, ARCH (TARCH) method
|Author :||İbrahim DOĞAN - ; Mahmut Şaban AFSAL; Bayram AYDIN & Süleyman GÜRBÜZ|
|Number of pages:||199-205|