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Determinants of exchange market pressure in Turkey: An econometric investigation

Determinants of exchange market pressure in Turkey: An econometric investigation

Feridun, Mete (2009) Determinants of exchange market pressure in Turkey: An econometric investigation. Emerging Markets Finance and Trade, 45 (2). pp. 65-81. ISSN 1540-496X (doi:https://doi.org/10.2753/REE1540-496X450204)

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Abstract

This paper investigates the hypothesis that there is a causal relation between speculative pressure and real exchange rate overvaluation, banking-sector fragility, and the level of international reserves in Turkey. An autoregressive distributed lag (ARDL) bounds-testing procedure and Granger causality within vector error- correction models (VECM) are applied to the period after the liberalization of capital flows (August 1989-August 2006). The results of the ARDL bounds test support the theory that exchange market pressure is in a long-run equilibrium relation with the three hypothesized variables over the sample period. On the other hand, the results of the short-run and long-run Granger causality tests indicate the existence of Granger causality running from the three variables to exchange market pressure. The findings further suggest that a feedback relation exists between banking-sector fragility and exchange market pressure.

Item Type: Article
Uncontrolled Keywords: ARDL bounds test, exchange market pressure, Granger causality
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
Faculty / Department / Research Group: Faculty of Business > Department of International Business & Economics
Faculty of Business > Greenwich Political Economy Research Centre (GPERC)
Faculty of Business > Institute of Political Economy, Governance, Finance and Accountability (IPEGFA) > Greenwich Political Economy Research Centre (GPERC)
Related URLs:
Last Modified: 02 Nov 2016 13:52
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
Selected for GREAT 2019: None
URI: http://gala.gre.ac.uk/id/eprint/7920

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