Exchange Rate Volatility and Domestic Consumption: A Time Series Evidence of Turkey

Kocak S., Karis C.

SOSYOEKONOMI, vol.31, no.55, pp.283-296, 2023 (ESCI) identifier identifier identifier

  • Publication Type: Article / Article
  • Volume: 31 Issue: 55
  • Publication Date: 2023
  • Doi Number: 10.17233/sosyoekonomi.2023.01.15
  • Journal Name: SOSYOEKONOMI
  • Journal Indexes: Emerging Sources Citation Index (ESCI), Scopus, TR DİZİN (ULAKBİM)
  • Page Numbers: pp.283-296
  • Karadeniz Technical University Affiliated: No


This study examines the short-run and long-run effects of exchange rate volatility on real consumption expenditures in the Turkish economy for 2003:Q1-2021:Q2 by using the Autoregressive Distributed Lag (ARDL) bounds testing approach. The analysis uses conditional variance values estimated from the Autoregressive Conditional Heteroskedastic (ARCH) model for the exchange rate volatility series. The ARDL bounds test results revealed that real exchange rate volatility has no effect on real consumption expenditures in the short run but affects real consumption expenditures negatively in the long run. This finding suggests that the exchange rate volatility may be an important component of consumption expenditures, which is another critical component of GDP.