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Exchange Rate Movements, Inflation Expectations, and Currency Substitution in Turkey

Author

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  • Mr. Fabio Scacciavillani

Abstract

This paper contains an empirical analysis of currency substitution in Turkey: a simple relationship between the share of foreign currency holdings in M2X on one side and movements in the exchange rate or inflation on the other is derived from a two-stage portfolio choice model. This relationship is estimated by band spectrum regression which allows to remove from the data the short-term cyclical components. The results show that the relationship between currency substitution depends mainly on long-term movements in the exchange rate, while the effect of inflation on currency substitution is not statistically significant.

Suggested Citation

  • Mr. Fabio Scacciavillani, 1995. "Exchange Rate Movements, Inflation Expectations, and Currency Substitution in Turkey," IMF Working Papers 1995/111, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1995/111
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=1970
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    Citations

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    Cited by:

    1. Kibritçioğlu, Aykut, 2002. "Causes of Inflation in Turkey: A Literature Survey with Special Reference to Theories of Inflation," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 43-76.
    2. Aysen Arac & Funda Telatar & Erdinc Telatar, 2012. "Investigating the Time Varying Nature of the Link between Inflation and Currency Substitution in the Turkish Economy," Hacettepe University Department of Economics Working Papers 20122, Hacettepe University, Department of Economics.
    3. Aykut Kibritcioglu, 2004. "A Short Review of the Long History of Turkish High Inflation," Economics Bulletin, AccessEcon, vol. 28(2), pages 1.
    4. Ümit Özlale & Kivilcim Metin Ozcan, 2005. "Does Time Inconsistency Problem Apply For Turkish Monetary Policy?," Working Papers 2005/2, Turkish Economic Association.

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