Türkiye's Unique Circle: Is Competitive Exchange Rate a Solution?

Abstract

As in most cases, need to be questioned Turkey's monetary policy tools for economic development in the country's savings. With the decisions taken after 2015, this understanding has created a unique circle in a way that will greatly advance the country's economy. The economic management in the country is being trained in this negative situation. In this study, the mutual causality relationship between the exchange rate, inflation and interest, which are the main targeting areas of the monetary policy, which puts the savings rate and the country's economy in a corrosive cycle, is tried to be explained with the method developed by Toda-Yamamoto (1995). According to results of this analysis the competitive exchange rate strategy does not have a significant effect on savings. It is possible to conclude that reverse savings may be the cause of the competitive exchange rate. In other words, the preference for a competitive exchange rate strategy due to the lack of savings can be seen as significant in this study. In Turkey, like many other developing countries, steps to achieve economic development must be viewed not only through the lens of monetary policy but also from the perspective of planning that ensures policy coherence, given the country's chronic issues.