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How does the Exchange Rate Movement Affect Macroeconomic Performance? A VAR Analysis with Sign Restriction Approach– Evidence from Turkey

Author

Listed:
  • Hakan M. Berument

    (Bilkent University)

  • Zulal S Denaux

    (Valdosta State University)

  • Yeliz Yalcin

    (Gazi University)

Abstract

In this paper, we assess the effect of exchange rate movement on macroeconomic performance by differentiating the source of exchange rate movement as either an expansionary monetary policy or a portfolio preference shock using quarterly data from Turkish economy for the period 1987:Q1 to 2008:Q3. Empirical evidence suggest that if the depreciation of the exchange rate stems from an expansionary monetary policy shock, then the effect of currency depreciation on the economy is expansionary. On the other hand, if currency depreciation comes from a portfolio choice allocation, then the effect of exchange rate deprecation on the economy is contractionary.

Suggested Citation

  • Hakan M. Berument & Zulal S Denaux & Yeliz Yalcin, 2012. "How does the Exchange Rate Movement Affect Macroeconomic Performance? A VAR Analysis with Sign Restriction Approach– Evidence from Turkey," Economics Bulletin, AccessEcon, vol. 32(1), pages 295-305.
    • Handle: RePEc:ebl:ecbull:eb-11-00545
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    References listed on IDEAS

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    Cited by:

    1. Umit Bulut, 2016. "May Monetary Transmission Lags Have a Role in Missing Inflation Targets in Turkey? Cointegration Tests with Structural Breaks and Structural VAR Analysis," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 8(4), pages 93-103, April.

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    More about this item

    Keywords

    Exchange Rates; Monetary Policy; Vector Autoregression and Sign Restrictions.;
    All these keywords.

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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