Symmetrical and Asymmetrical Causality Relationship between Foreign Portfolio Investments and Exchange Rate Volatility in Türkiye
Chapter from the book:
Eroğlu Sevinç,
D.
&
Yüce Akıncı,
G.
(eds.)
2023.
Studies on Economic and Financial Policies.
Synopsis
The primary objective of this study is to empirically examine the causal relationship between foreign portfolio investments and exchange rate volatility in the Turkish economy. This study uses quarterly data covering the period from 1994Q1 to 2021Q2. To determine exchange rate volatility, the study employs the GARCH(1,1) model and estimates the conditional variance series using the real effective exchange rate series. The results of the bootstrap Toda-Yamamoto analysis indicate a causality relationship from foreign portfolio investments to exchange rate volatility. The Hatemi-J method is utilized to conduct asymmetric causality analysis between the variables, and the findings suggest no asymmetric causality relationship between exchange rate volatility and foreign portfolio investments. Based on the empirical evidence, this study concludes that foreign portfolio investments significantly impact exchange rate volatility. Therefore, appropriate policies concerning portfolio investments are necessary to reduce the volatility in the exchange rate.
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Copyright (c) 2023 Hayriye Esra Akyüz- Güven Güney- Serhat Alpağut- Deniz Sevinç- Aylin Koca- Merter Akıncı- Haktan Sevinç- Ömer Yılmaz- Nermin Güney- Sertaç Hopoğlu- Sefa Özbek- Ali Çelik- Ayşe Arı- Ahmet Gökçe Akpolat- Hasan Tansoy- İsmail Hakkı Kofoğlu- Adem Türkmen- İkram Yusuf Yarbaşı- Mehmet Öksüz- İlkay Badurlar- Arife Özdemir Höl- Hasan Alpago- Tuğba Dayıoğlu- Gönül Yüce Akıncı- Fatma Mumcu Küçükçaylı- Demet Eroğlu Sevinç- Behçet Doğan Oktaş; Demet Eroğlu Sevinç- Gönül Yüce Akıncı