Analysis of the Relationship between Real Effective Exchange Rate, Common Equity Tier 1 Ratio and Return on Equity: Evidence from Turkey
Künye
KILCI, E. N., & BAYGIN, B. K. (2019). Analysis of the Relationship between Real Effective Exchange Rate, Common Equity and Return on Equity: Evidence from Turkey. Alphanumeric Journal, 7(2), 319-332.Özet
The analysis of the relationship between exchange rate fluctuations, common equity and return on equity is of high importance
to be able to improve adequate policies with the purpose of maintaining stability in foreign exchange rate, when it is taken into
consideration that mentioned fluctuations lead to the loss in bank capital and profitability. Hence, the studies in the related
literature have been increasing in great amount recently. The objective of this study is to investigate the relationship between
real effective exchange rate, common equity and return on equity in the period of 2014:01 - 2018:09. The unit root properties of
the series are tested by using Carrion-i Silvestre et al.(2009) unit root test and the cointegration relationship between the series
is investigated by employing Maki(2012) cointegration test. Both tests take into account multiple structural breaks. The results
indicate that there is only a long run relationship between real effective exchange rate and return on equity for Turkish Banking
Sector with structural breaks.