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Do Exchange Rates Affect Inflation? Evidence from Emerging Market Economies

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Author Info

  • Baki Demirel

    ()
    (University of Gaziosmanpasa, Faculty of Economics and Administrative Sciences, Economics)

  • Baris Alpaslan

    ()
    (University of Manchester, School of Social Sciences, Economics)

  • Emre Guneser Bozdag

    ()
    (University of Gazi, Faculty of Economics and Administrative Sciences, Economics)

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    Abstract

    After 1980s, chronic inflation in Turkey has shaken the confidence in the domestic currency, and thus operating debit-credit transactions through dollars. The aim of this study is to analyse the impact of exchange rate pass-through into inflation in both Turkey and emerging market economies that were highly dollarized and shifted to a flexible exchange rate regime, together with inflation targeting policy in an attempt to switch to the advanced economy, and to examine whether stabilization programs under flexible exchange rate regimes and particularly inflation targeting policy may eliminate dollarization in the periods 1995-2001 and 2002-2010.

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    File URL: http://eaf.ku.edu.tr/sites/eaf.ku.edu.tr/files/erf_wp_1318.pdf
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    Bibliographic Info

    Paper provided by Koc University-TUSIAD Economic Research Forum in its series Koç University-TUSIAD Economic Research Forum Working Papers with number 1318.

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    Length: 15 pages
    Date of creation: Sep 2013
    Date of revision:
    Handle: RePEc:koc:wpaper:1318

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    Related research

    Keywords: De-Dollarization; Inflation Targeting; Exhange Rate Pass-Through;

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    References

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    1. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 329-368.
    2. Michael B. Devereux & Philip R. Lane, 2000. "Exchange Rates and Monetary Policy in Emerging Market Economies," Working Papers 072000, Hong Kong Institute for Monetary Research.
    3. Hakan Kara & Hande Kucuk Tuger & Umit Ozlale & Burc Tuger & Devrim Yavuz & Eray M. Yucel, 2005. "Exchange Rate Pass-Through in Turkey : Has it Changed and to What Extent?," Working Papers 0504, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    4. Jose Manuel Campa & Linda S. Goldberg, 2006. "Pass Through of Exchange Rates to Consumption Prices: What has Changed and Why?," NBER Working Papers 12547, National Bureau of Economic Research, Inc.
    5. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear Of Floating," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 379-408, May.
    6. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
    7. Frankel, Jeffrey & Parsley, David & Wei, Shang-Jin, 2005. "Slow Passthrough Around the World: A New Import for Developing Countries?," Working Paper Series rwp05-016, Harvard University, John F. Kennedy School of Government.
    8. Fred Furlong & Robert Ingenito, 1996. "Commodity prices and inflation," Economic Review, Federal Reserve Bank of San Francisco, pages 27-47.
    9. Guillermo A. Calvo & Alejandro Izquierdo & Luis Fernando Mejía, 2008. "Systemic Sudden Stops: The Relevance of Balance-Sheet Effects and Financial Integration," Research Department Publications 4581, Inter-American Development Bank, Research Department.
    10. Andrew Crockett & Chairman, 1999. "General discussion : exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 411-422.
    11. Taylor, John B., 2000. "Low inflation, pass-through, and the pricing power of firms," European Economic Review, Elsevier, vol. 44(7), pages 1389-1408, June.
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Do Exchange Rates Affect Inflation? Evidence from Emerging Market Economies?
      by pmakdissi in NEP-ARA blog on 2013-11-06 05:56:20

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