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The role of expectations for currency crisis dynamics—The case of the Turkish lira

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  • Joscha Beckmann
  • Robert L. Czudaj

Abstract

This paper examines whether and how expectations have contributed to the turbulent path of the Turkish lira since 2008. We derive uncertainty measures surrounding gross domestic product (GDP) growth, inflation, the interest rate, and exchange rates based on survey data from Consensus Economics. Our results illustrate that forecasts have affected realized exchange rates and stock market returns via increased uncertainty. We also show that expectations regarding monetary policy have changed throughout the sample period. In line with, a gradual adjustment of expectations professionals have accounted for the violation of the Taylor rule.

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  • Joscha Beckmann & Robert L. Czudaj, 2023. "The role of expectations for currency crisis dynamics—The case of the Turkish lira," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 42(3), pages 625-642, April.
    • Handle: RePEc:wly:jforec:v:42:y:2023:i:3:p:625-642
    DOI: 10.1002/for.2940
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    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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