Does currency substitution affect exchange rate uncertainty? the case of Turkey
AbstractIn this paper, we investigate whether the currency substitution can affect the exchange rate uncertainty for the Turkish economy. Considering the whole time period 1987M01-2006M12 as well as thesub-periods 1987M01-1999M12 and 2001M03-2006M12 for sensitivity analysis, our estimation results employing contemporaneous exponential GARCH (EGARCH) methodology of Nelson (1991) indicate that currency substitution leads to the exchange rate uncertainty. Besides, conditional variance reacts more to past positive shocks than to negative innovations of equal size.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 20319.
Date of creation: 2007
Date of revision:
Exchange rate ; dollarization ; currency substitution ; inflation ; exponential GARCH models ; conditional variance ; leverage effect ; Turkish economy ;
Find related papers by JEL classification:
- F31 - International Economics - - International Finance - - - Foreign Exchange
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