THE INFLUENCE OF ECONOMIC FACTORS ON THE FORMATION OF THE PURCHASING POWER PARITY OF THE TURKISH LIRA IN THE CONTEXT OF A CURRENCY CRISIS
Abstract
The article is devoted to comprehensive study of the economic factors influencing the formation of the purchasing power parity (PPP) of the Turkish lira under the conditions of a currency crisis. In the context of increasing global economic instability, the study of equilibrium exchange rate formation mechanisms as one of the means of assessing Turkey’s national price competitiveness. The theoretical essence of PPP is revealed through the prism of comparative analysis of approaches to the interpretation of the concept purchasing power parity by various scientists who previously studied related topics. The paper analyzes the dynamics of the PPP of the US dollar against the lira, as well as inflation rates in Turkey, export volumes and GDP for 2010-2024 to establish the existence of connections between these indicators with help of correlation and regression analysis. Thus, a strong correlation (r = 0,87) was revealed between the depreciation of the national currency of Turkey and the growth of export volumes, which confirms the government’s strategy to increase the country’s export through the decrease in the purchasing power and exchange rate of lira for the attractiveness of foreign partners. In addition, as a result of the analysis, a unique effect was revealed, when the rapid growth of Turkey’s GDP in recent years (r = 0,94) was accompanied by an accelerated decrease in purchasing power of national currency, which contradicts the logical situation (increase in GDP have a positive effect on the currency). The research substantiates that the deviation from fundamental macroeconomic rules and the implementation of an unconventional monetary policy led to a devaluation spiral. In the process of the study the impact of the growth of household expenses on GDP of Turkey and the growth of import volumes was revealed. Based on the obtained research results, complex means are proposed to increase the purchasing power of national currency of Turkey, which are manifested in setting the interest rate above the inflation rate, changing a structural transformation of exports in favor of high-tech products to change the vector of trade from cheap lira to innovation, as well as attracting foreign investments to create demand for lira.
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