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Analyzing CBRT's FOREX interventions using EGARCH (2001-2006)

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  • Levent, Korap

Abstract

The post-2001 period in the Turkish economy witnessed many stabilization efforts and regulations applied by policy makers so as to eliminate the effects of the economic crisis on the economy. Dealing with the monetary policy, these policies were conducted in favor of just-in-time interventions when the volatilities in some main monetary aggregates were occurred, and foreign exchange rate market (FOREX) interventions constituted a great deal of such kind of policies. In order to examine such policy issues implemented in the Turkish economy, we try to estimate in our paper how effective were these policies, and our ex-post estimation results permitting asymmetries in policy implementation process using EGARCH estimation method of the contemporaneous econometrics reveal that these policies seem not to be effective in reducing volatilities occurred in the FX market but in accumulating reserves through purchase auctions implemented up to the very recent times of the mid-2006, although the just-after crisis interventions in the form of sale auctions, to the great extent, give support to the declared role of monetary authority in this sense.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20634.

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Date of creation: 2007
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Publication status: Published in Atatürk Üniversitesi İktisadi ve İdari Bilimler Dergisi 2.21(2007): pp. 39-54
Handle: RePEc:pra:mprapa:20634

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Keywords: Foreign Exchange Market ; Intervention ; EGARCH Models ; Turkish Economy ;

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  1. 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.
  2. Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
  3. Rudi Dornbusch, 2001. "A Primer on Emerging Market Crises," NBER Working Papers 8326, National Bureau of Economic Research, Inc.
  4. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
  5. Paul Cashin & C. John McDermott, 2003. "An Unbiased Appraisal of Purchasing Power Parity," IMF Staff Papers, Palgrave Macmillan, vol. 50(3), pages 1.
  6. Domac, Ilker & Mendoza, Alfonso, 2004. "Is there room for foreign exchange interventions under an inflation targeting framework ? Evidence from Mexico and Turkey," Policy Research Working Paper Series 3288, The World Bank.
  7. Irfan Civcir, 2002. "Before The Fall Was The Turkish Lira Overvalued?," Working Papers 0220, Economic Research Forum, revised Jul 2002.
  8. Levent Korap, 2006. "An Analysis of Central Bank Interventions on Forex Market For The Post-Crisis Period," Working Papers 2006/4, Turkish Economic Association.
  9. Ana Maria Herrera & Pinar Ozbay, 2005. "A Dynamic Model of Central Bank Intervention," Working Papers 0501, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  10. Oya Pınar Ardıc & Faruk Selcuk, 2006. "The dynamics of a newly floating exchange rate: the Turkish case," Applied Economics, Taylor & Francis Journals, vol. 38(8), pages 931-941.
  11. Sarno, Lucio & Taylor, Mark P, 2001. "Official Intervention in the Foreign Exchange Market: Is It Effective, and, If So, How Does It Work?," CEPR Discussion Papers 2690, C.E.P.R. Discussion Papers.
  12. Ozge Akinci & Olcay Yucel Culha & Umit Ozlale & Gulbin Sahinbeyoglu, 2005. "Causes and Effectiveness of Foreign Exchange Interventions for the Turkish Economy," Working Papers 0505, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  13. Ozge Akinci & Olcay Yucel Culha & Umit Ozlale & Gulbin Sahinbeyoglu, 2005. "The Effectiveness of Foreign Exchange Interventions for the Turkish Economy : A Post-Crisis Period Analysis," Working Papers 0506, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  14. Ercan Uygur, 2001. "Krizden Krize Türkiye: 2000 Kasým ve 2001 Þubat Krizleri," Working Papers 2001/1, Turkish Economic Association, revised Apr 2001.
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