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Are devaluations contractionary? The case of Turkey

Author

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  • Mehmet Sencicek
  • Kamal Upadhyaya

Abstract

This article studies the output effects of currency devaluation in Turkey using annual data from 1970 to 2004. An empirical model that incorporates monetary, fiscal and other external variables in addition to exchange rates is developed. Before estimating the model, time-series properties of the data are diagnosed. Two forms of the model, one with real exchange rate and the other with nominal exchange rate and relative price level (foreign-to-domestic price ratio) are estimated. The results suggest that devaluation is contractionary in the short run, expansionary in the medium run and neutral in the long run, and the effects emanate from nominal devaluation and not from the changes in relative price level.

Suggested Citation

  • Mehmet Sencicek & Kamal Upadhyaya, 2010. "Are devaluations contractionary? The case of Turkey," Applied Economics, Taylor & Francis Journals, vol. 42(9), pages 1077-1083.
    • Handle: RePEc:taf:applec:v:42:y:2010:i:9:p:1077-1083
    DOI: 10.1080/00036840701721208
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    Cited by:

    1. Mohsen Bahmani-Oskooee & Amirhossein Mohammadian, 2018. "Asymmetry Effects of Exchange Rate Changes on Domestic Production in Emerging Countries," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 54(6), pages 1442-1459, May.
    2. Mohsen Bahmani-Oskooee & Ferda Halicioglu & Amirhossein Mohammadian, 2018. "On the asymmetric effects of exchange rate changes on domestic production in Turkey," Economic Change and Restructuring, Springer, vol. 51(2), pages 97-112, May.
    3. Tatiana Evdokimova & Pavel Trunin & Andrei Zubarev, 2013. "The Impact of the Real Ruble Exchange Rate on the Economic Activity in Russia," Research Paper Series, Gaidar Institute for Economic Policy, issue 165P, pages 164-164.

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