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Exchange rate versus monetary aggregate targeting: the Turkish case

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  • Kerim Peren Arin
  • Timur Han Gur

Abstract

This article compares and contrasts the macroeconomic effects of exchange rate targeting and money supply targeting by using quarterly data from Turkey for the period February 1986-March 2000. The results of the VAR analysis show that the exchange rate does not have the traditional 'hump-shaped effect' that money supply has on output. In addition, we observe that an exchange rate depreciation leads to a temporary improvement in the trade balance for only a year, while monetary innovations have longer-lasting effects. Those results suggest that money-based targeting is more appropriate than exchange-rate targeting for Turkey.

Suggested Citation

  • Kerim Peren Arin & Timur Han Gur, 2009. "Exchange rate versus monetary aggregate targeting: the Turkish case," Applied Economics, Taylor & Francis Journals, vol. 41(16), pages 2085-2092.
    • Handle: RePEc:taf:applec:v:41:y:2009:i:16:p:2085-2092
    DOI: 10.1080/00036840601019190
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