Proceedings of Annual Spain Business Research Conference
26 - 27 May 2016, Novotel Barcelona City Hotel, Barcelona, Spain,
ISBN: 978-1-925488-05-0
Real Exchange Rates and Non-Traded Good Prices: A
Proxy Approach for Turkey
Kadir Y. Eryiğit and Özlem Uzuner
This paper investigates the long-run comovement between GDP Deflator based real
exchange rates and relative prices of non-traded goods by considering Turkish
Lira/US Dollar and Turkish Lira/Euro bilateral real exchange rates for the period 20012015. To this end, by using the ratio of consumer prices to producer prices as proxies
for the price levels of the non-traded goods in Turkey, USA and Eurozone, these longrun relationships are estimated within Johansen et al. (2000) cointegration framework
which allows for the existence of structural breaks and a natural basis is provided in
measuring long-run real exchange rate misalignment.According to preliminary results
of the analysis, there is a cointegrating relationship between real exchange rates and
relative prices of non-traded goods for both bilateral real exchange rates. Additionally,
it was found that both real exchange rates were endogenous while relative prices of
non-traded goods for Turkey, USA and Eurozone were exogenous.
Keywords: Purchasing Power
cointegration, structural breaks.
Parity,
non-traded
goods,
relative
prices,
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Kadir Y. Eryiğit (Ph.D.), Uludağ University, Department of Econometrics,, Faculty of Economics and
Administrative Sciences, 16059, Görükle, Bursa, kyeryigit@uludag.edu.tr, Phone: +90 224 294 11 35
Fax:+90 224 442 89 49
Özlem Uzuner (Miss), Uludağ University, Department of Econometrics, Faculty of Economics and
Administrative Sciences, 16059, Görükle, Bursa, ozleemuzuner@gmail.com, Phone: +90 224 294 11
35 Fax:+90 224 442 89 4