2020 IB Extended Essays

“25.24% to 21.62%”), lowers price for domestic goods hence attracting a higher demand for Turkish products. This results in a higher amount for exports consequently impacting the appreciation of the Turkish Lira positively. (Economics Beta, 2016)

The lowered price of goods caused by the increase in interest rate has led to a positive impact to Turkey’s Trade and Current Balance according to the TCMB(Central Bank of Turkey). When the policy was implemented, the Trade Balance went from “-927,00” to “1.047,00” as seen in Figure 5 (ALKİN, 2020) . However, the value has had a negative value for the remainder of 2019. To further authenticate the discussion, Current Balance was taken into consideration due to the inclusion of the net amount received for domestically owned factors of production used abroad. As seen in Figure 6, the current balance has increased from “1.853,00 to 3.043,00” showcasing a change of “64.2%”, ceteris paribus (ALKİN, 2020) . Although the remainder of the year still has been negative. This can be due to the political issues Turkey has faced such as the Trade Wars. As a result, the information obtained from Figures 5 and 6, demonstrate an increase in Turkey’s exports at the end of 2018. In addition, the higher interest rates can also attract foreign demand for the currency due to the desire of having higher returns for investments. This coupled with the lowered inflation, has increased the exports of turkey by “8,7%” in the 4th quarter of 2018 which, in relation to the research question, is beneficial for the aim of appreciating the value of the Turkish Lira.

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