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Misaligned? Overvalued?. The Untold Story of the Turkish Lira

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Author Info
Deniz Atasoy
Sweta C. Saxena

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Abstract

Scholars agree that overvalued exchange rates result in currency crises. This paper estimates the equilibrium real exchange rate for Turkey, finding that the lira was indeed overvalued before the crises in 1994 and 2001. However, the actual real exchange rate is at present close to the equilibrium level, exposing the myth propagated by Turkish exporters that the lira's overvaluation is responsible for Turkey's uncompetitive exports. The paper also highlights the role for fiscal adjustment in macroeconomic stability.

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File URL: http://mesharpe.metapress.com/link.asp?target=contribution&id=R135G500817H4723
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Publisher Info
Article provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.

Volume (Year): 42 (2006)
Issue (Month): 3 (May)
Pages: 29-45
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Handle: RePEc:mes:emfitr:v:42:y:2006:i:3:p:29-45

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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024

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Related research
Keywords: equilibrium real exchange rate; misalignment; overvaluation; Turkish lira;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Guillermo A. Calvo & Carlos A. Vegh, 1999. "Inflation Stabilization and BOP Crises in Developing Countries," NBER Working Papers 6925, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Erol, Turan & Van Wijnbergen, Sweder, 1997. "Real exchange rate targeting and inflation in Turkey: An empirical analysis with policy credibility," World Development, Elsevier, vol. 25(10), pages 1717-1730, October. [Downloadable!] (restricted)
  3. Giyas Gökkent & Carlos Moslares & Rafael Amiel-Saenz, 2003. "Failure of an Exchange-Rate-Based Stabilization Plan in Turkey," Eastern European Economics, M.E. Sharpe, Inc., vol. 41(1), pages 35-67, January. [Downloadable!] (restricted)
  4. Kaminsky, Graciela & Lizondo, Saul & Reinhart, Carmen M., 1997. "Leading indicators of currency crises," Policy Research Working Paper Series 1852, The World Bank. [Downloadable!]
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  5. Ahmet N. Kipici, 1996. "Terms of Trade and Economic Fluctuations," Discussion Papers 9615, Research and Monetary Policy Department, Central Bank of the Republic of Turkey. [Downloadable!]
  6. Alper, C. Emre & Saglam, Ismail, 1999. "The Equilibrium Real Exchange Rate: Evidence from Turkey," MPRA Paper 1924, University Library of Munich, Germany. [Downloadable!]
  7. Enrique Alberola & Susana G. Cervero & Humberto Lopez & Angel Ubide, 2000. "Global Equilibrium Exchange Rates: Euro, Dollar, "Ins," "Outs," and Other Major Currencies in a Panel Cointegration Framework," Econometric Society World Congress 2000 Contributed Papers 0051, Econometric Society. [Downloadable!]
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  8. E. Murat Ucer & Pierre-Richard Agénor & C. John McDermott, 1997. "Fiscal Imbalances, Capital Inflows, and the Real Exchange Rate: The Case of Turkey," IMF Working Papers 97/1, International Monetary Fund.
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  9. Ü. Özlale & E. Yeldan, 2004. "Measuring exchange rate misalignment in Turkey," Applied Economics, Taylor and Francis Journals, vol. 36(16), pages 1839-1849, September. [Downloadable!] (restricted)
  10. Asikoglu, Yaman & Uctum, Merih, 1992. "A critical evaluation of exchange rate policy in Turkey," World Development, Elsevier, vol. 20(10), pages 1501-1514, October. [Downloadable!] (restricted)
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  11. Gonzalo, J. & Granger, C., 1992. "Estimation of Common Long-Memory Components in Cointegrated Systems," Papers 4, Boston University - Department of Economics.
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  12. Doroodian, K & Jung, Chulho & Yucel, Ahmet, 2002. "Estimating the Equilibrium Real Exchange Rate: The Case of Turkey," Applied Economics, Taylor and Francis Journals, vol. 34(14), pages 1807-12, September. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Balázs Égert, 2005. "Equilibrium Exchange Rates in Southeastern Europe, Russia, Ukraine and Turkey: Healthy or (Dutch) Diseased?," William Davidson Institute Working Papers Series wp770, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
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