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The effects of exchange rate risk on economic performance: the Turkish experience

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  • Hakan Berument
  • N. Nergiz Dincer

Abstract

This study examines the effects of real exchange rate risk on the economic performance for an emerging, small open economy: Turkey. When the ratios of the total foreign exchange liabilities of the Central Bank of the Republic of Turkey (CBRT) to: (1) total reserves; (2) the CBRT's reserves; and (3) the CBRT's total Turkish lira liabilities are taken proxy of exchange rate risk, the empirical evidence suggests that the increase in exchange rate risk causes a depreciation in the real exchange rate, an increase in prices and a decrease in output.

Suggested Citation

  • Hakan Berument & N. Nergiz Dincer, 2004. "The effects of exchange rate risk on economic performance: the Turkish experience," Applied Economics, Taylor & Francis Journals, vol. 36(21), pages 2429-2441.
  • Handle: RePEc:taf:applec:v:36:y:2004:i:21:p:2429-2441
    DOI: 10.1080/0003684042000287637
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    References listed on IDEAS

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    1. Kamin, Steve B. & Rogers, John H., 2000. "Output and the real exchange rate in developing countries: an application to Mexico," Journal of Development Economics, Elsevier, vol. 61(1), pages 85-109, February.
    2. Davis, George & Kanago, Bryce, 1996. "On Measuring the Effect of Inflation Uncertainty on Real GNP Growth," Oxford Economic Papers, Oxford University Press, vol. 48(1), pages 163-175, January.
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    Cited by:

    1. Saadet Kasman & Duygu Ayhan, 2006. "Macroeconomic Volatility under Alternative Exchange Rate Regimes in Turkey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 6(2), pages 37-58.
    2. Arslanturk, Yalcin & Balcilar, Mehmet & Ozdemir, Zeynel Abidin, 2011. "Time-varying linkages between tourism receipts and economic growth in a small open economy," Economic Modelling, Elsevier, vol. 28(1), pages 664-671.
    3. Armah, Stephen E., 2008. "Explaining Ghana's Recent Good Cocoa Karma: Smuggling Incentive Argument," 2008 Annual Meeting, July 27-29, 2008, Orlando, Florida 6359, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    4. Kasman, Adnan & Ayhan, Duygu, 2008. "Foreign exchange reserves and exchange rates in Turkey: Structural breaks, unit roots and cointegration," Economic Modelling, Elsevier, vol. 25(1), pages 83-92, January.

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