Money demand, financial liberalization and currency substitution in Turkey

Civcir, Irfan

doi:10.1108/01443580310492817

Cited by 39 publications

(29 citation statements)

References 30 publications

(24 reference statements)

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“…This requires that no feedback effect of disturbances from the steady-state money demand functional form can be constructed as a dynamic VEC model upon domestic inflation, and such a case reveals explicitly that the main factors leading to the domestic inflation are determined out of the money demand variable space considered in this paper. Whereas, in line with a quantity theoretical perspective, excess money derived from a money demand equation should have a positive significant effect on the inflation (Civcir, 2000). We give the graph of the cointegrating relationship:…”

Section: Resultsmentioning

confidence: 83%

“…On the other side, Metin (1994), Civcir (2000), Civcir (2003), Bahmani-Oskooee and Karacal (2006) and some papers by the Central Bank of the Republic of Turkey (CBRT) researchers such as Mutluer and Barlas (2002), Akıncı (2003) and Altınkemer (2004) try to test the demand for money relationship for the Turkish economy. In our paper, we examine these issues of interest by considering the demand for currency in circulation as a function of real income, domestic inflation and exchange rate depreciation.…”

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confidence: 99%

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Turkish Money Demand, Revisited: Some Implications for Inflation and Currency Substitution Under Structural Breaks

Saatçioğlu¹,

Korap²

2007

boun

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Section: Resultsmentioning

confidence: 83%

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confidence: 99%

Turkish Money Demand, Revisited: Some Implications for Inflation and Currency Substitution Under Structural Breaks

Saatçioğlu¹,

Korap²

2007

boun

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“…In this study it is determined that when the rate of expected return of exchange rate increases, the currency substitution accelerates and thus the main determinant of national currency demand becomes expected return of exchange rate. Selç uk (1994 and1997), Özkarametre (1996), Civcir (2003), Komarek andMelecky (2003), Genc et. al.…”

Section: In Which They Model An Open Economy Hasmentioning

confidence: 99%

Is There Any Meaningful Ratchet Effect in the Process of Currency Substitution? Evidence from Turkey

Şiklar

Karagöl

Şahin

2017

BER

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Currency substitution is an important phenomenon that has emerged with the liberalization of economies. In the Turkish economy, the studies about the currency substitution have gained momentum as a result of the extreme depreciation of the domestic currency in early 2000s. Switching to the flexible exchange rate system practice after the 2000-2001 crisis and putting into implement the inflation targeting strategy since 2005 have significantly reduced the currency substitution rate. Since 2014, the depreciation of domestic currency has made the currency substitution phenomenon a current issue again. This study analyses the main determinants of currency substitution phenomenon by considering the demand for money in the context of Turkey. Developed empirical model is estimated by using ARDL methodology for 2003-2016 periods by using monthly data obtained from Turkish economy. Estimation ISSN 2162-4860 2017 http://ber.macrothink.org 147 results indicate that interest rate differential is an important variable in the process of currency substitution in Turkey. Besides, estimation results also support the existence of a strong ratchet effect in the allocation of deposits between local and foreign currencies. These results together show that strong policies with higher credibility should be pursued with a longer period of time to make reverse currency substitution in effect and to assure economic units to turn back local currency denominated deposits. Business and Economic Research

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“…Naturally, the dependent variable is M2Y and real gross domestic product (GDP), volatility of interest rate on treasury bills (RBSH), volatility of interest rate on time deposit (RMSH), Inflation Rate (INF) and Exchange Rate (EXCH) are independent variables. We used the log-linear money demand function on the basis of log-linear money demand functions that are used by Bjørnland (2005), Carruth and Sanchez-Fung (2000) and Civcir (2003). All variables are in logarithm except the interest rates.…”

Section: Empirical Modelmentioning

confidence: 99%

The Effects of The Interest Rate Volatility on Turkish Money Demand

Çeliköz¹,

Arslan²

2011

IBR

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This study aims to examine, especially the effects of interest rate (time deposit and treasury bills) volatilities on the demand for money in case of Turkey for 1987Turkey for : 1-2007: 3 period. Quarterly data of all variables are used as the research data and Pesaran, Shin and Smith (2001) 's bound test is used as the research method. In computing interest rate volatilities, moving-sample standart deviation method which is proposed by Kenen and Rodrik (1986) and Koray and Lastrapes (1989) is used. According to the results, the long run coefficient of gross domestic product is positive and statistically significant as expected. Although, the volatility of interest rate on treasury bills is positive as expected, it is statistically insignificant. On the other side, the coefficient of volatility of interest rate on time deposit, the coefficient of inflation rate and the coefficient of exchange rate are all negative and statistically significant as expected.Keywords: Money Demand, Bound Test, Interest Rate Volatility IntroductionExamining the determinant of the demand for money is important in order to create and conduct a healthy monetary policy which is closely related to whole economy. For example, a factor that increases the demand for money may adversely affect economic performance by increasing nominal income and velocity of money circulation.This study aims to examine, especially the effects of interest rate volatilities in case of Turkey along with traditional factors affecting the demand for money. Since the increase in interest rate volatility is expected to lead structural changes in the structure of behavioral relations which defines financial sector (Walsh, 1984: 133) it will also greatly affect the demand for money. But, it must be stressed here that the nominal interest rate includes two components: Expected real rate of return and an expected rate of inflation. Since nominal interest rate volatility may reflect the volatility of either one or both of these components, it can be said that the impact of interest rate volatility could have emerged in two-ways. Although, there is a consensus among economists that the volatility of real interest rate increases money demand, the effect of the volatility of inflation is arguable. But, empirical evidences indicate that there is a negative relationship between volatility of inflation and the demand for money. The justification: an increase in the volatility of inflation makes all nominal assets including money riskier to hold since their value in terms of goods and services becomes unpredictable. The greater risk will cause some investors to shift part of their wealth out of nominal assets into tangible assets such as commodity inventories. Therefore, to the extent that volatility of nominal interest rate reflects volatility of inflation, volatility of nominal interest rates could have a negative effect on money demand (Garner, 1986; 30-31). While the theoretical perspectives reveal multifaceted effects, issues relating to empirical studies hav...

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Money demand, financial liberalization and currency substitution in Turkey

Cited by 39 publications

References 30 publications

Turkish Money Demand, Revisited: Some Implications for Inflation and Currency Substitution Under Structural Breaks

Turkish Money Demand, Revisited: Some Implications for Inflation and Currency Substitution Under Structural Breaks

Is There Any Meaningful Ratchet Effect in the Process of Currency Substitution? Evidence from Turkey

The Effects of The Interest Rate Volatility on Turkish Money Demand

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