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Misaligned? Overvalued?. The Untold Story of the Turkish Lira

Listed author(s):
  • Deniz Atasoy
  • Sweta C. Saxena

Scholars agree that overvalued exchange rates result in currency crises. This paper estimates the equilibrium real exchange rate for Turkey, finding that the lira was indeed overvalued before the crises in 1994 and 2001. However, the actual real exchange rate is at present close to the equilibrium level, exposing the myth propagated by Turkish exporters that the lira's overvaluation is responsible for Turkey's uncompetitive exports. The paper also highlights the role for fiscal adjustment in macroeconomic stability.

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Article provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.

Volume (Year): 42 (2006)
Issue (Month): 3 (May)
Pages: 29-45

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Handle: RePEc:mes:emfitr:v:42:y:2006:i:3:p:29-45
Contact details of provider: Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024

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  15. Undp, 1992. "HDR 1992 - Global Dimensions of Human Development," Human Development Report (1990 to present), Human Development Report Office (HDRO), United Nations Development Programme (UNDP), number hdr1992, December.
  16. U. Ozlale & E. Yeldan, 2004. "Measuring exchange rate misalignment in Turkey," Applied Economics, Taylor & Francis Journals, vol. 36(16), pages 1839-1849.
  17. K. Doroodian & Chulho Jung & Ahmet Yucel, 2002. "Estimating the equilibrium real exchange rate: the case of Turkey," Applied Economics, Taylor & Francis Journals, vol. 34(14), pages 1807-1812.
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