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Analyzing the Persistence of Currency Substitution Using a Ratchet Variable : The Turkish Case

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  • VUSLAT US

Abstract

Although previous studies on currency substitution in Turkey confirm the existence of currency substitution, these works ignore whether this process reached an irreversible stage or not. This paper analyzes the persistence of currency substitution in Turkey through inclusion of a ratchet variable, the past peak value of the currency substitution. Results using an autoregressive distributed lag (ARDL) approach suggest that currency substitution during 1990-93 is not persistent enough to be irreversible. During 1995-99, even though currency substitution in the narrow sense is persistent, currency substitution in the broader sense is not irreversible. Therefore, there is still room for effective monetary policy.

Suggested Citation

  • Vuslat Us, 2003. "Analyzing the Persistence of Currency Substitution Using a Ratchet Variable : The Turkish Case," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 39(4), pages 58-81, July.
    • Handle: RePEc:mes:emfitr:v:39:y:2003:i:4:p:58-81
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    Cited by:

    1. repec:zbw:bofitp:2007_003 is not listed on IDEAS
    2. Hisao Kumamoto, 2014. "Recent Experiences with Currency Substitution," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 5(4), pages 1-12, October.
    3. ?lyas ??klar & Veysel Karag?l & Suzan ?ahin, 2017. "Is There Any Meaningful Ratchet Effect in the Process of Currency Substitution? Evidence from Turkey," Business and Economic Research, Macrothink Institute, vol. 7(2), pages 146-162, December.
    4. Inthiphone Xaiyavong & Toshihisa Toyoda, 2016. "Currency Substitution in Laos," Asian Economic Journal, East Asian Economic Association, vol. 30(1), pages 67-89, March.
    5. Harrison, Barry & Vymyatnina, Yulia, 2007. "Currency substitution in a de-dollarizing economy: the case of Russia," BOFIT Discussion Papers 3/2007, Bank of Finland Institute for Emerging Economies (BOFIT).
    6. Faruk Selçuk, 2005. "The Policy Challenge with Floating Exchange Rates: Turkey’s Recent Experience," Open Economies Review, Springer, vol. 16(3), pages 295-312, July.
    7. Samreth, Sovannroeun, 2011. "An empirical study on the hysteresis of currency substitution in Cambodia," Journal of Asian Economics, Elsevier, vol. 22(6), pages 518-527.
    8. Harrison, Barry & Vymyatnina, Yulia, 2007. "Currency substitution in a de-dollarizing economy : the case of Russia," BOFIT Discussion Papers 3/2007, Bank of Finland, Institute for Economies in Transition.

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