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The Effects of Turkish Central Bank's Interventions Over Currency Rate Volatility

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  • K. Batu Tunay

Abstract

This study aims to identify and analyze the effects of Turkish Central Bank's interventions over currency rate volatility. US Dolar and Euro Returns of Turkish Lira between 04.01.1999 and 24.09.2008 are modelled in the study. Econometric methods used are ARFIMA-GARCH and ARFIMA-FIGARCH models. Findings obtained from model verify the presence of long memory properties, and increasing effects of Central Bank's interventions over currency volatility. According to model's findings, currency shocks have no permanent characteristic and market dynamics will return stability back to markets; therefore, Central Bank should avoid intervening currency markets.

Suggested Citation

  • K. Batu Tunay, 2008. "The Effects of Turkish Central Bank's Interventions Over Currency Rate Volatility," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 2(2), pages 77-112.
  • Handle: RePEc:bdd:journl:v:2:y:2008:i:2:p:77-112
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    File URL: http://www.bddk.org.tr/WebSitesi/turkce/Raporlar/BDDK_Dergi/6077makale%204.pdf
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    Keywords

    Exchange Rate Volatility; Central Bank Interventions; ARFIMA-GARCH and ARFIMA-FIGARCH Models;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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