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Turkish Currency Crisis of 2000-2001, Revisited

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  • Nazim Kadri Ekinci
  • Korkut Alp Erturk

Abstract

Turkey's exchange rate based stabilization programme had collapsed within just 11 months of its implementation in the midst of a liquidity crunch in November 2000 caused by a reversal in the capital inflow. The onset of the stabilization programme created ample opportunities for speculative investors to make relatively safe one-sided bets, and the initial success of the programme in bringing down interest rates implied substantial capital gains over securities obtained in 1999 and early stages of the programme. It was only natural that speculative investors would take the opportunity to realize these gains while the firm exchange rate commitment was still in place. The programme failed to deal with this contingency effectively, assuming that as long as it was implemented faithfully, long-term investors would be forthcoming to takeover positions speculators would want to unload. That assumption proved disastrously wrong.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Review of Applied Economics.

Volume (Year): 21 (2007)
Issue (Month): 1 ()
Pages: 29-41

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Handle: RePEc:taf:irapec:v:21:y:2007:i:1:p:29-41

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Related research

Keywords: Currency crises; financial liberalization; capital flow reversals; Turkey; asset price speculation;

References

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  1. Taylor, Lance, 1998. "Capital Market Crises: Liberalisation, Fixed Exchange Rates and Market-Driven Destabilisation," Cambridge Journal of Economics, Oxford University Press, vol. 22(6), pages 663-76, November.
  2. 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.
  3. Korkut Erturk, 2003. "On the Changing Nature of Currency Crises," Working Paper Series, Department of Economics, University of Utah 2003_02, University of Utah, Department of Economics.
  4. Andrew Berg & Paolo Mauro & Michael Mussa & Alexander K. Swoboda & Esteban Jadresic & Paul R. Masson, 2000. "Exchange Rate Regimes in an Increasingly Integrated World Economy," IMF Occasional Papers 193, International Monetary Fund.
  5. Demir, Firat, 2004. "A Failure Story: Politics and Financial Liberalization in Turkey, Revisiting the Revolving Door Hypothesis," World Development, Elsevier, vol. 32(5), pages 851-869, May.
  6. Rodriguez, Carlos Alfredo, 1982. "The Argentine stabilization plan of December 20th," World Development, Elsevier, vol. 10(9), pages 801-811, September.
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