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Exogenous characteristics of short-term capital flows: can they be under control? evidence from Turkey

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  • Levent, Korap
  • Özgür, Aslan

Abstract

In our paper, we give an essay trying to explore whether short-term capital flows can affect and/or be affected by some main domestic macroeconomic indicators called ‘pull’ factors such as real effective exchange rate, trade balance, real income growth process, domestic inflation and real interest structure for the case of Turkish economy. Our estimation results employing some contemporaneous estimation techniques of unrestricted dynamic vector autoregression (VAR) models reveal that short-term capital flows have in fact an important role on the ‘pull’ factors in the sense that inflows appreciate the real effective exchange rate and in turn deteriorate the trade balance, encourage the real income growth, and decrease the real interest rates. But we could not find any significant effects of the ‘pull’ factors on the capital flows.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19504.

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Date of creation: 2007
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Publication status: Published in İstanbul Üniversitesi Sosyal Bilimler Meslek Yüksekokulu Sosyal Bilimler Dergisi 1.2007(2007): pp. 1-16
Handle: RePEc:pra:mprapa:19504

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Keywords: Capital Flows ; VAR Modelling ; Turkish Economy ;

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References

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  1. Fernandez-Arias, Eduardo & DEC, 1994. "The new wave of private capital inflows : push or pull?," Policy Research Working Paper Series 1312, The World Bank.
  2. Ashoka Mody & Antu Panini Murshid, 2002. "Growing Up with Capital Flows," IMF Working Papers 02/75, International Monetary Fund.
  3. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, Econometric Society, vol. 48(1), pages 1-48, January.
  4. Kim, Yoonbai, 2000. "Causes of capital flows in developing countries," Journal of International Money and Finance, Elsevier, Elsevier, vol. 19(2), pages 235-253, April.
  5. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1993. "“Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," MPRA Paper 7125, University Library of Munich, Germany.
  6. Yung-Hsiang Ying & Yoonbai Kim, 2001. "An Empirical Analysis on Capital Flows: The Case of Korea and Mexico," Southern Economic Journal, Southern Economic Association, vol. 67(4), pages 954-968, April.
  7. Bahmani-Oskooee, Mohsen, 1991. "Is there a long-run relation between the trade balance and the real effective exchange rate of LDCs?," Economics Letters, Elsevier, Elsevier, vol. 36(4), pages 403-407, August.
  8. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. Végh, 2005. "When It Rains, It Pours: Procyclical Capital Flows and Macroeconomic Policies," NBER Chapters, in: NBER Macroeconomics Annual 2004, Volume 19, pages 11-82 National Bureau of Economic Research, Inc.
  9. Hakan Berument & N. Nergiz Dincer, 2004. "Do Capital Flows Improve Macroeconomic Performance in Emerging Markets? : The Turkish Experience," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., M.E. Sharpe, Inc., vol. 40(4), pages 20-32, July.
  10. Dasgupta, Dipak & Ratha, Dilip, 2000. "What factors appear to drive private capital flows to developing countries? and how does official lending respond?," Policy Research Working Paper Series 2392, The World Bank.
  11. Zhaohui Chen & Mohsin S. Khan, 1997. "Patterns of Capital Flows to Emerging Markets," IMF Working Papers 97/13, International Monetary Fund.
  12. Taylor, Mark P & Sarno, Lucio, 1997. "Capital Flows to Developing Countries: Long- and Short-Term Determinants," World Bank Economic Review, World Bank Group, World Bank Group, vol. 11(3), pages 451-70, September.
  13. Cem Saatcioglu & Levent Korap, 2006. "Determinants of Turkish Inflation," Working Papers, Turkish Economic Association 2006/7, Turkish Economic Association.
  14. Chuhan, Punam & Claessens,Constantijn A. & Mamingi, Nlandu, 1993. "Equity and bond flows to Asia and Latin America : the role of global and country factors," Policy Research Working Paper Series 1160, The World Bank.
  15. Mohsen Bahmani-Oskooee, 2001. "Nominal and real effective exchange rates of middle eastern countries and their trade performance," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 33(1), pages 103-111.
  16. Aysu Insel & Nesrin Sungur, 2003. "Sermaye Akýmlarýnýn Temel Makroekonomik Göstergeler Üzerindeki Etkileri: Türkiye Örneði-1989:III-1999:IV," Working Papers, Turkish Economic Association 2003/8, Turkish Economic Association.
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