Exchange Rate Pass-Through in Turkey: Hatemi̇-J Asymmetric Causality Test

Abstract

variables are the same. The difference distinguishing this study from the other in the literature is that the current study investigates the possible causality among the shocks by separating the positive and negative shocks of the given variable. In this study, Hatemi-J (2012) asymmetric causality test was used to investigate the exchange rate pass-through effect on the general price level in Turkey. At the end of the test; at the 5% significance level, a one-way asymmetric causality relationship was found between the positive USD component and the positive CPI component, the positive EURO component and the positive CPI component and also the positive EURO component and the positive USD component. Moreover, Toda-Yamamoto causality test has been utilized in order to compare with the results from Hatemi-J asymmetric causality test. According to findings of Toda-Yamamoto causality test, there is no exchange rate pass-through to prices effect in Turkey.