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GMM estimation of currency substitution in a high-inflation economy: evidence from Turkey

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  • Faruk Seļuk

Abstract

This paper shows that currency substitution is a first-order importance in a high inflation economy like Turkey. A money-in-the-utility function model is estimated and tested using Hansen's Generalized Method of Moments procedure. The results show that elasticity of substitution between the Turkish Lira and the US dollar is high and statistically significant. The estimate of the share of foreign balances in producing domestic money services is considerably large and statistically significant.

Suggested Citation

  • Faruk Seļuk, 1997. "GMM estimation of currency substitution in a high-inflation economy: evidence from Turkey," Applied Economics Letters, Taylor & Francis Journals, vol. 4(4), pages 225-227.
    • Handle: RePEc:taf:apeclt:v:4:y:1997:i:4:p:225-227
    DOI: 10.1080/758518499
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    References listed on IDEAS

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    1. Alberto Giovannini & Bart Turtelboom, 1992. "Currency Substitution," NBER Working Papers 4232, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Kibritçioğlu, Aykut, 2002. "Causes of Inflation in Turkey: A Literature Survey with Special Reference to Theories of Inflation," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 43-76.
    2. Levent, Korap, 2007. "Does currency substitution affect exchange rate uncertainty? the case of Turkey," MPRA Paper 20319, University Library of Munich, Germany.
    3. Metin-Özcan, Kıvılcım & Us, Vuslat, 2007. "Dedollarization in Turkey after decades of dollarization: A myth or reality?," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 385(1), pages 292-306.
    4. Carlos Esteban Posada P., 1997. "Otro costo de una inflación perfectamente prevista," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 16(31), pages 5-33, June.
    5. Aykut Kibritcioglu, 2004. "A Short Review of the Long History of Turkish High Inflation," Economics Bulletin, AccessEcon, vol. 28(2), pages 1.
    6. Olga Aslanidi, 2008. "Dollarization in Transition Economies: New Evidence from Georgia," CERGE-EI Working Papers wp366, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    7. Selcuk, Faruk, 2003. "Currency substitution: new evidence from emerging economies," Economics Letters, Elsevier, vol. 78(2), pages 219-224, February.

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