ABSTRACT
In this study, the effects of the Foreign Exchange Rate-Protected Deposit (FXPD) Implementation, which started toward the end of December 2021 to stabilize the Turkish lira, on the exchange rate are analyzed through Granger causality Test and Breitung and Candelon’s spectral GC test using weekly data for the period between February 18, 2022, and April 14, 2023, for Türkiye. The traditional GC test suggested one-way causality from exchange rates to money supply and from FXPD to deposit interest rates. Breitung and Candelon’s spectral GC analysis revealed that in the medium and long term, there is causality from the dollar exchange rate to the FXPD, in the short and medium term toward the deposit interest rate and in the long term toward the money supply. Moreover, there is a medium- and long-term causality relationship between the money supply and the FXPD. In general, the results of the study suggest that to achieve the desired impact on exchange rates through the exchange rate-protected deposit application and to ensure stability in exchange rates, deposit interest rates need to be maintained at a level that safeguards depositors’ savings against inflation rates.
