The Impact of Exchange Rates, the COVID-19 Pandemic, and the Ukraine War on the Turkish Economy

Author Name Willem THORBECKE (Senior Fellow, RIETI) / Ahmet SENGONUL (Sivas Cumhuriyet University)
Creation Date/NO. May 2022 22-E-043
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The Turkish lira depreciated by 200% against the U.S. dollar and the euro between 2012 and 2022. We investigate how depreciations affect Turkish imports, exports, and stock prices. We find that depreciations cause large decreases in imports but do not stimulate exports. We also find that they decrease stock prices for most sectors of the Turkish economy. In spite of the weak currency, economic growth in Turkey has remained resilient during the COVID-19 pandemic and the beginning of the Russia-Ukraine war. A stronger lira can strengthen this resilience by increasing the purchasing power of Turkish residents and the profitability of Turkish firms.