2020 IB Extended Essays

To examine how the monetary policy decision impacted the TRY, the determinants of currency appreciation will be analysed and applied to the context, hence the economic theory central to the topic are interest rates and exchange rates. However it must be recognised that the analysis does not cover many external issues such as political dilemmas and external policies such as, reserve ratio, bank deposit tax rate arrangements and consumption taxes. The economic phrase ceteris paribus will be mentioned to acknowledge the possibility that monetary policy may not be the sole reason for altering currency values. (Jocelyn Blink, 2012) Furthermore, to answer the “To what extent” statement of the question, the effects of Turkey’s policy will be compared to the UK’s use of contractionary monetary policy. Finally, the reasons behind the difference will be investigated using other economic determinants such as, current account deficits, inflation rates and multiplier values for both countries. The research question was explored using secondary to obtain background knowledge on the topic of exchange rates and interest rates, whilst primary research was conducted in order to acquire specific knowledge on the topic of exchange rates which is particularized to the chosen country. Judgement sampling was used to particularize the areas of knowledge concerned with exchange rates and my own prior knowledge. The impact of a change in interest rates and the determinants of exchange rates were researched to identify which topics were to be researched more thoroughly. These topics were then altered to the specific country and the interview questions were formed accordingly. Two economists in Turkey were interviewed to gain specific knowledge on exchange rates and interest rates particularly in Turkey. This combined with knowledge obtained through secondary research helped form the argument of how interest rates impacted exchange rates in Turkey. Methodology:

5