ABSTRACT
This paper sets out to explore whether the Turkish geopolitical uncertainty exhibits significant linkages with fluctuations in the Turkish lira (TRY) values against other currencies. The period examined covers the Erdoğan administration (March 2003 up to the present). The innovative geopolitical uncertainty index by Caldara and Iacoviello and modern GARCH methodologies are adopted in order to explore how geopolitical risk influences currency values and the overall economy during this turbulent period. Econometric outcomes reveal that geopolitical uncertainty leads to devaluation of TRY against the US dollar, the Swiss franc and the Swedish krona but in a non-significant manner whereas mixed results emerge concerning the impacts of macroeconomic or financial variables.
Acknowledgments
The authors are grateful to the editor Prof. Dr. Gaibulloev and the anonymous reviewer for their useful comments that helped to improve the quality of this study.
Disclosure Statement
No potential conflict of interest was reported by the authors.
Data availability statement
All data are available upon request.
Notes
1. The ‘Gülen movement’ is a transnational socially conscious Islamic movement with political overtones and aspirations, inspired by the writings and preachings of Fethullah Gülen, a Turkish Islamic preacher who lives in the USA since 1999. The movement is considered as a terrorist organization by Turkey and Pakistan.
2. This index calibrates countries through i) Electoral process and pluralism ii) Functioning of Government iii) Political Participation iv) Political Culture v) Civil Liberties. Based on these five categories it calibrates the countries either as: 1) Full Democracies ii) Flawed Democracies iii) Hybrid Regimes iv) Authoritarian Regimes. See in detail: https://www.eiu.com/public/topical_report.aspx?campaignid=democracyindex2019
3. Turkey had already cooperated with China in the 1990’s in the development of missile systems and transfer of relative know how to her. At first, in 1997, Turkey signed a contract with China for the licensed production of the WS-1A and WS-1B rocket launchers known as Kasırga and in 1998 a similar contract was signed with the CPMIEC company (for the Chinese B-611 (Short Range Ballistic Missile) system, covering the production of a battery of B-611 with more than 200 missiles, at a reported cost of USD 300,000,000. The current Turkish made J-600 T Yildirim missile system design is based on the B-611 system, and with this, Turkey became a ‘member of the club’ of those countries which have ballistic missiles.
5. https://www.reuters.com/article/us-israel-turkey-greece/israel-opposes-turkey-libya-maritime-border-accord-idUSKBN1YR1VNhttps://www.naftemporiki.gr/story/1553593/bundestag-service-views-turkey-libya-maritime-deal-illegal-detrimental-to-third-partieshttps://www.france24.com/en/20200108-turkey-libya-deals-void-egypt-france-greece-cyprus
7. https://asiatimes.com/2020/11/erdogan-drives-liras-fast-and-furious-collapse/https://tradingeconomics.com/turkey/inflation-cpi
8. https://www.dailysabah.com/economy/2017/08/19/economy-minister-turkey-eyes-eurasian-customs-union
9. A large portion of them were covered by using Turkish lira since they consisted national purchases, thus the money circulated within the Turkish economy. In particular, in the recent years Turkey has made a great progress in developing a plethora of state of the art military equipment so as to cover its national needs with a view to minimize her independence in military equipment from abroad and also achieve profits from exports of them. The strategic aim of Turkey, according to Erdoğan’s plans is Turkey to achieve military autarky by 2023 although this seems to be an unrealistic scenario.