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Liability dollarization, exchange market pressure and fear of floating: empirical evidence for Turkey

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  • Feridun, Mete

Abstract

The objective of this article is to examine the relationship between liability dollarization and the Exchange Market Pressure (EMP) in Turkey within an Autoregressive Distributed Lag (ARDL) and Granger causality framework using monthly data from 1991:12 to 2006:08. The findings suggest that there exists a long-term equilibrium relationship between EMP and liability dollarization, where liability dollarization Granger causes EMP both in the short- and long-run, with no evidence of reverse causality. This suggests that the predominance of foreign currency liabilities in the banks’ balance sheets in Turkey induces a selling pressure in the exchange market as well as a fear of floating.

Suggested Citation

  • Feridun, Mete, 2011. "Liability dollarization, exchange market pressure and fear of floating: empirical evidence for Turkey," Greenwich Papers in Political Economy 7925, University of Greenwich, Greenwich Political Economy Research Centre.
    • Handle: RePEc:gpe:wpaper:7925
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    References listed on IDEAS

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    1. Christopher F Baum, 2005. "Stata: The language of choice for time-series analysis?," Stata Journal, StataCorp LP, vol. 5(1), pages 46-63, March.
    2. Carlos Arteta, 2003. "Are financially dollarized countries more prone to costly crises?," International Finance Discussion Papers 763, Board of Governors of the Federal Reserve System (U.S.).
    3. Shrestha, Min B. & Chowdhury, Khorshed, 2005. "Sequential Procedure for Testing Unit Roots in the Presence of Structural Break in Time Series Data," Economics Working Papers wp05-06, School of Economics, University of Wollongong, NSW, Australia.
    4. Kar‐yiu Wong & Richard Y. K. Ho, 2002. "The Asian Crisis, 1997," Review of International Economics, Wiley Blackwell, vol. 10(1), pages 1-1, February.
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    Cited by:

    1. Błażejowski, Marcin & Kufel, Paweł & Kufel, Tadeusz & Kwiatkowski, Jacek & Osińska, Magdalena, 2018. "Model selection for modeling the demand for narrow money in transitional economies," MPRA Paper 90458, University Library of Munich, Germany.
    2. Andrii Kaminskyi & Nataliia Versal, 2018. "Risk Management of Dollarization in Banking: Case of Post-Soviet Countries," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 14(2), pages 21-40.
    3. Jerzy Boehlke & Marcin Faldzinski & Maciej Galecki & Magdalena Osinska, 2020. "Searching for Factors of Accelerated Economic Growth: The Case of Ireland and Turkey," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 292-304.
    4. Montes, Gabriel Caldas & Ferreira, Caio Ferrari, 2020. "Does monetary policy credibility mitigate the fear of floating?," Economic Modelling, Elsevier, vol. 84(C), pages 76-87.

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