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Impact of Currency Appreciation and Currency Shock on the Real Side in a Small and Liberal Economy

Author

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  • Refik Erzan

    (Department of Economic, Faculty of Economics & Administrative Sciences, Bogazici University (BU))

  • Osman Sari

Abstract

The paper examines the impact of the currency appreciation (1988-1993) and the sudden and major depreciation (early 1994) on the real side of the Turkish economy by investigating the volume and commodity composition of production, domestic demand and trade. Two patterns are captured and empirically estimated: (i) In a small economy with low barriers to trade, real currency appreciation ('overvaluation') can turn the industry inward-looking. (ii) Exports respond to a sudden depreciation of the currency with a lag (in fact first with a drop, characterized by the J-curve). The estimation of the J-curve gives the timing of the export response.

Suggested Citation

  • Refik Erzan & Osman Sari, 1996. "Impact of Currency Appreciation and Currency Shock on the Real Side in a Small and Liberal Economy," Working Papers 9623, Economic Research Forum, revised 08 Aug 1996.
    • Handle: RePEc:erg:wpaper:9623
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    Cited by:

    1. Tatiana Evdokimova & Pavel Trunin & Andrei Zubarev, 2013. "The Impact of the Real Ruble Exchange Rate on the Economic Activity in Russia," Research Paper Series, Gaidar Institute for Economic Policy, issue 165P, pages 164-164.

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