WHY US DOLLAR İS İMPORTANT FOR TURKEY’S ECONOMY?

why US dollar is important %%sep%% So why us dollar is important for turkey %%sep%% How can we earn? %%sep%% Turkey’s imports and exports.

The one of the answers to the question of why US dollar is important is US dollar is a reserve currency. What does reserve currency mean, reserve currency can be converted to any other currency. This is just one of the explanations of why US dollar is important and there may many other reasons that makes  dollarimportant but that is the most important one. So why US dollar is important for Turkey?

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The first reason is Turkey has an open economy.

It means that Turkey has economic relationships with other countries and selling goods and services(export) and buying goods and services(import). And when a country needs to buy goods or services from other countries, that country must pay them US dollar that makes US dollar important because dollar can be converted all other currencies and country which collected those dollars could export by spending those dollars, that is why we need dollar. How can we earn dollar? It is easy to understand. We must sell goods or services to other countries to earn dollar for covering nation’s import.

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why US dollar is important %%sep%% So why us dollar is important for turkey %%sep%% How can we earn? %%sep%% Turkey’s imports and exports.        (Turkish Statistical Institute, 2022)

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The graph above represents the changes in Turkey’s imports and exports.

As you can see at the graph the changing at Turkey’s imports is greater than the exports. It means that Turkey’s dollar demand is increasing faster than Turkey’s dollar supply, and it could be causing a value increase at US dollar against the Turkish lira.

What will be if TL lose its value against dollar?

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Firstly, if TL loss itsvalue against dollar it will be cause an increase at inflation. Why an increase at USD/TRY will cause an inflation? The first and one of the most important reasons is the structure of Turkey’s import. Because, according to last data which published by Turkish statistical institute, the 81,3% of Turkey’s import is intermediary goods. It means that Turkey must import to produce something. That is the most important explanation of the effect of dollar at inflation. Also, it is obvious to see at graph below the relationship between US dollar and consumer price index (the right axis represents the value of dollar, and the left axis represents the consumer price index). They are behaving almost same direction.

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why US dollar is important %%sep%% So why us dollar is important for turkey %%sep%% How can we earn? %%sep%% Turkey’s imports and exports.

To sum up, as we mentioned above the US dollar is important because it can be converted to the almost all other countries’ currencies. Another question is how US dollar became most important currency? We will explain that question in another article.

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Yusuf TOKAT

Hello, ı am Yusuf. I am an economics student at Anadolu University, and I enjoy sharing all my knowledge about economics and finance with you. Thank you for your interest

 

 

 

REFERENCE

Turkish Statistical Institute (2022, Jan 31). Foreign Trade Statistics, December 2021. https://data.tuik.gov.tr/Bulten/Index?p=Dis-Ticaret-Istatistikleri-Aralik-2021-45535

 

 

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