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Fear of Floating in Turkey

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  • Ilyas Siklar
  • Taner Sekmen

Abstract

Many emerging markets have adopted floating exchange rate regimes after currency crises. Turkey has experienced a floating regime since 2002 combined with inflation targeting. The aim of this paper is to investigate the ¡°fear of floating¡± phenomenon, named by Calvo and Reinhart (2002), in the transition to a low and stable inflation environment in Turkey before and after inflation targeting. The results demonstrate that the levels of exchange rate pass-through decreased substantially, thus weakening the ¡°fear of floating¡± phenomenon in Turkey after inflation targeting. Therefore, we argue whether any reactions of the central bank to foreign exchange rates imply the ¡°fear of floating¡± or the ¡°fear of inflation¡±

Suggested Citation

  • Ilyas Siklar & Taner Sekmen, 2015. "Fear of Floating in Turkey," Business and Economic Research, Macrothink Institute, vol. 5(2), pages 288-307, December.
    • Handle: RePEc:mth:ber888:v:5:y:2015:i:2:p:288-307
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    References listed on IDEAS

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    1. Choudhri, Ehsan U. & Hakura, Dalia S., 2006. "Exchange rate pass-through to domestic prices: Does the inflationary environment matter?," Journal of International Money and Finance, Elsevier, vol. 25(4), pages 614-639, June.
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    3. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 379-408.
    4. Reginaldo P. Nogueira, Jr. & Miguel A. León-Ledesma, 2011. "Does exchange rate pass-through respond to measures of macroeconomic instability?," Journal of Applied Economics, Universidad del CEMA, vol. 14, pages 167-180, May.
    5. Juan F. Castro, 2004. "On the Reasons Behind Fear of Floating: Pass-through Effects vs. Contractionary Depreciations," Econometric Society 2004 Latin American Meetings 268, Econometric Society.
    6. Barry Eichengreen, 2006. "Can Emerging Markets Float? Should They Inflation Target?," Chapters, in: Matías Vernengo (ed.), Monetary Integration and Dollarization, chapter 8, Edward Elgar Publishing.
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    More about this item

    Keywords

    Inflation targeting; Exchange rate; Fear of floating; Turkey;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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