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Similarities and Differences of The 1994 and 2001 Turkish Currency Crises: A Signal Approach

In: Proceedings of the Conference on Emerging Economic Issues in a Globalizing World

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Author Info
Þakir Görmüþ (Adnan Menderes University)
Recep Tekeli (Adnan Menderes University)
Osman Peker (Adnan Menderes University)
Abstract

The paper will examine the 1994 and 2001 Turkish currency crises by using early warning system which is based on the “signal” approach proposed by Kaminsky, Lizondo and Reinhart (KLR) (1998). The “signal” approach is a non-parametric approach. In this approach, the behavior of a number of individual variables is monitored and they are evaluated against a certain threshold levels. If any of these indicator exceeds its threshold, it is said that indicator issues a “signal” that a currency crisis may occur within a given period. The objectives of this paper are two folds: to investigate causes of currency crises under consideration and to compare similarities and differences of the 1994 and 2001 currency crises. The data consist of monthly data and range from January 1987 to November 2005 for the following variables: reserves, inflation rate, GDP growth, portfolio capital inflow to reserves, short term external debt to reserves, domestic debt, money supply to reserves, current account to GDP, real exchange rate overvaluation, regional stock market return, regional market pressure index, stock market index, export and import. Results showed that 2001 crisis is deeper and costlier than 1994 crisis, external factors play more imported role in 2001 crisis than 1994 crisis and in both crises Weighted Composite Index increases sharply previous the both crises.

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This chapter was published in: Þakir Görmüþ & Recep Tekeli & Osman Peker Proceedings of the Conference on Emerging Economic Issues in a Globalizing World, , pages 246-260, 2008.

This item is provided by Izmir University of Economics in its series Papers of the Annual IUE-SUNY Cortland Conference in Economics with number 200815.

Handle: RePEc:izm:prcdng:200815

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Related research
This chapter was published in the following book, which is listed on IDEAS:
Oguz Esen & Ayla Ogus (ed.), 2008. "Proceedings of the International Conference on Emerging Economic Issues in a Globalizing World," Proceedings of the IUE-SUNY Cortland Conference in Economics, Izmir University of Economics, number 2008, November. [Downloadable!]
Keywords: SMEs; Turkey; Currency Crises; early warning system;

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References listed on IDEAS
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  1. Barry Eichengreen & Andrew K. Rose & Charles Wyplosz, 1996. "Contagious Currency Crises," NBER Working Papers 5681, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  2. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  3. Kaminsky, Graciela & Lizondo, Saul & Reinhart, Carmen M., 1997. "Leading indicators of currency crises," Policy Research Working Paper Series 1852, The World Bank. [Downloadable!]
    Other versions:
  4. Geske, Robert & Roll, Richard, 1983. " The Fiscal and Monetary Linkage between Stock Returns and Inflation," Journal of Finance, American Finance Association, vol. 38(1), pages 1-33, March. [Downloadable!] (restricted)
  5. Stulz, Rene M, 1986. " Asset Pricing and Expected Inflation," Journal of Finance, American Finance Association, vol. 41(1), pages 209-23, March. [Downloadable!] (restricted)
  6. Marcel Fratzscher, 2002. "On currency crises and contagion," Working Paper Series 139, European Central Bank. [Downloadable!]
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  7. Bilson, Christopher M. & Brailsford, Timothy J. & Hooper, Vincent J., 2001. "Selecting macroeconomic variables as explanatory factors of emerging stock market returns," Pacific-Basin Finance Journal, Elsevier, vol. 9(4), pages 401-426, August. [Downloadable!] (restricted)
  8. Maurice Obstfeld, 1994. "The Logic of Currency Crises," NBER Working Papers 4640, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  9. Maurice Obstfeld, 1986. "Rational and Self-Fulfilling Balance-of-Payments Crises," NBER Working Papers 1486, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Fama, Eugene F, 1981. "Stock Returns, Real Activity, Inflation, and Money," American Economic Review, American Economic Association, vol. 71(4), pages 545-65, September. [Downloadable!] (restricted)
  11. Willem Thorbecke, 1994. "Trade Deficit News, Systematic Risk and the Crash of 1987," Eastern Economic Journal, Eastern Economic Association, vol. 20(1), pages 97-106, Winter. [Downloadable!]
  12. Steven Radelet & Jeffrey Sachs, 1998. "The Onset of the East Asian Financial Crisis," NBER Working Papers 6680, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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