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The Monetary Models of the Turkish Lira/Dollar Exchange Rate: Long-run Relationships, Short-run Dynamics and Forecasting

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  • CIVCIR Irfan

Abstract

This article examines four versions of the monetary model for the Turkish lira/U.S. dollar exchange rate. The analysis focuses on two issues. First, we test whether the exchange rate is cointegrated with the long-run determinants predicted by economic theory. The sticky price versions of the monetary model support the hypothesis of cointegration. Then, we construct simultaneous equation systems that incorporate the long-run equilibrium relationships and complex short-run dynamics. The second issue is the ability of the monetary models to forecast the future exchange rate. We show that a fully dynamic out-of-sample forecast from the equilibrium-correcting monetary models significantly outperforms forecasts from random-walk models and differenced vector autoregressive models.
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  • CIVCIR Irfan, "undated". "The Monetary Models of the Turkish Lira/Dollar Exchange Rate: Long-run Relationships, Short-run Dynamics and Forecasting," EcoMod2003 330700038, EcoMod.
  • Handle: RePEc:ekd:003307:330700038
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    Cited by:

    1. Levent KORAP, 2008. "Exchange Rate Determination Of Tl/Us$:A Co-Integration Approach," Istanbul University Econometrics and Statistics e-Journal, Department of Econometrics, Faculty of Economics, Istanbul University, vol. 7(1), pages 24-50, May.
    2. Balazs Egert, 2013. "Dutch Disease in the Post-Soviet Countries of Central and South-West Asia: How Contagious is it?," CESifo Working Paper Series 4186, CESifo Group Munich.
    3. Balázs Égert, 2010. "The Impact of Monetary and Commodity Fundamentals, Macro News and Central Bank Communication on the Exchange Rate: Evidence from South Africa," Open Economies Review, Springer, vol. 21(5), pages 655-677, November.
    4. Balázs Égert, 2012. "Dutch diease in the post-soviet countries of central and south-west Asia: How contagious is it?," Post-Print hal-01385841, HAL.
    5. Kemal Soyer & Hale Ozgit & Husam Rjoub, 2020. "Applying an Evolutionary Growth Theory for Sustainable Economic Development: The Effect of International Students as Tourists," Sustainability, MDPI, Open Access Journal, vol. 12(1), pages 1-20, January.

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