Estimating the equilibrium real exchange rate: the case of Turkey

Doroodian, Khosrow; Jung, Chul-Ho; Yücel, Ahmet Hilmi

doi:10.1080/00036840210125503

Cited by 16 publications

(11 citation statements)

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“…However, given the low power of the ADF test, the failure of that study to reject the unit root null might be attributed to the small sample size of 19 annual observations. Doroodian et al (2002) perform a similar analysis for Turkey and also find that the terms of trade are stationary. Mongardini (1998) concludes that, in the case of Egypt, the terms of trade are fractionally integrated.…”

Section: Iii2 Estimation Resultsmentioning

confidence: 79%

“…Empirical applications of the BEER approach to developing and emerging countries are extensive. Examples include: Elbadawi (1994) for Chile, Ghana and India; Mongardini (1998) for Egypt; Spatafora and Stavrev (2003) for Russia; MacDonald and Ricci (2003) for South Africa; Doroodian et al (2002) for Turkey;Mathisen (2003) for Malawi; and Edwards (1994), who estimates the model for a panel of 12 developing and emerging economies. 2 The approach has also been extensively employed in the context of Central and Eastern Europe (see Égert, 2004, for an overview).…”

Section: Literature Reviewmentioning

confidence: 99%

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Assessing the Equilibrium Exchange Rate of the Malaysian Ringgit: A Comparison of Alternative Approaches

Koske

2008

Asian Economic Journal

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Drawing on the behavioral equilibrium exchange rate and the fundamental equilibrium exchange rate approaches, this paper assesses the equilibrium value of the real effective exchange rate of the Malaysian ringgit over the past 25 years. For 2005, when the Malaysian authorities exited from the peg with the US dollar, both models determine a slight undervaluation of the currency. Openness and real GDP per capita have been the main drivers of real exchange rate movements in the past, although non‐tradable productivity, government consumption, and net foreign assets have also had a sizable impact. The paper also highlights the limitations of applying the two approaches in the context of emerging countries.

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Section: Iii2 Estimation Resultsmentioning

confidence: 79%

Section: Literature Reviewmentioning

confidence: 99%

Assessing the Equilibrium Exchange Rate of the Malaysian Ringgit: A Comparison of Alternative Approaches

Koske

2008

Asian Economic Journal

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“…This effect on the equilibrium real exchange rate depends on the composition of the consumption expenditure between tradable goods and non-tradable goods, (see Ibrahim 2016). An increase in government consumption can either lead to an appreciation (positive sign) or depreciation (negative sign) of the exchange rate depending on whether this increased consumption is biased towards non-tradables or tradables respectively, (see Edwards 1989;Doroodian et al 2002;Naseem et al 2009;Wondemu and Potts 2016). Rodrik (2008) and Acosta et al (2009) concluded that as GDP increases, the real exchange rate appreciates; hence we expect a positive sign for the GDP coefficient.…”

Section: Model and Datamentioning

confidence: 99%

“…The a priori expectation is that the equilibrium REER will be more appreciated with higher terms of trade (TOT), (see Elbadawi et al 2012;Doroodian et al 2002). Given T&T's large dependence on energy exports, which accounts for, on average, over 80% of the country's total merchandise exports, we proxy TOT using the oil price.…”

Section: Model and Datamentioning

confidence: 99%

“…Economies 2018, 6, 52; doi:10.3390/economies6040052 www.mdpi.com/journal/economies Economies 2018, 6, 52 2 of 23 Doroodian et al (2002) posit that it is a general consensus among researchers that the state must pursue an appropriate exchange rate policy as part of its liberalization effort in order to strengthen the competitiveness of domestic firms against established foreign firms. In other words, maintaining the real exchange rate at the "wrong" level can have negative effects on the nation's competitiveness.…”

Section: Introductionmentioning

confidence: 99%

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Real Exchange Rate Misalignment and Economic Growth: The Case of Trinidad and Tobago

Conrad

Jagessar

2018

Economies

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Empirical studies outline developing countries’ experience economic growth through an undervalued exchange rate and that exchange rate overvaluations have negative long term effects on economic growth. This paper examined the impact of exchange rate movements as well as exchange rate misalignments on economic growth for the Trinidad and Tobago economy over the period 1960 to 2016. We find statistically significant evidence that both exchange rate appreciation and misalignments impact negatively on economic growth in the T&T economy. Drilling deeper, we find interestingly that there exist no non-linear effects of exchange rate misalignments on growth. Specifically, we find statistically significant evidence that both overvaluations and under valuations hamper economic growth in the Trinidad and Tobago economy. We attribute this to T&T’s small and underdeveloped manufacturing sector that tends to be overlooked on account of its energy resources, in addition to the fact that its manufacturing sector is highly import oriented. A major policy recommendation would be for the critical reassessment of the rules governing the Heritage and Stabilization Fund (HSF), as government expenditure was allowed to follow energy revenues due to its current limitations.

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The Policy Challenge with Floating Exchange Rates: Turkey’s Recent Experience

Selçuk

2005

Open Econ Rev

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This paper evaluates the developments in the Turkish economy in light of the Central Bank of Turkey's (CBT) policies during a recent period of floating exchange rate system (March 2001-July 2003). It is found that the CBT was effective in containing volatility and reducing the average inflation rate while there was a strong recovery of output. However, there are accumulated risks in the economy. Particularly, the extreme appreciation of the Turkish lira during this period and the record level of real interest rates give the impression that the current state of the economy is fragile. Unless the government accelerates the structural reform process and pursues sound fiscal policies to reduce the public sector borrowing requirement and the debt ratio, an adverse shock to the system may trigger a reversal of fortune.Imagine an economy with an ever-rising domestic debt and record real interest rates, a high and persistent inflation, an extremely weak and shallow banking sector (occasionally, with some corrupt bankers), political instability, and a geographical location with constant turmoil in neighboring countries. On top of this, add a dramatic collapse of a fixed exchange rate based stabilization program which resulted in a market-forced devaluation followed by a floating exchange rate regime. Is it possible to conduct a policy such that the volatility of the exchange rate may be contained and the implicit inflation targeting may result in significantly lower inflation rates while real output growth picks up? The recent developments in the Turkish economy show that the answer is yes but with a significant risk remaining in the economy.February 19, 2001 was a major turning point in Turkish political and economic history. That day, Turkish Prime Minister Bulent Ecevit announced that there was a serious "dispute'' between himself and the country's President. He further emphasized that "of course, this is a serious political crisis'' without elaborating the future of the government or the ongoing stabilization program which aimed at lowering inflation with a fixed nominal exchange rate depreciation. The same day the stock market dived 18 percent and the Central Bank of

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Estimating the equilibrium real exchange rate: the case of Turkey

Cited by 16 publications

References 1 publication

Assessing the Equilibrium Exchange Rate of the Malaysian Ringgit: A Comparison of Alternative Approaches

Assessing the Equilibrium Exchange Rate of the Malaysian Ringgit: A Comparison of Alternative Approaches

Real Exchange Rate Misalignment and Economic Growth: The Case of Trinidad and Tobago

The Policy Challenge with Floating Exchange Rates: Turkey’s Recent Experience

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