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Misaligned? Overvalued? The Untold Story of the Turkish Lira

Author

Listed:
  • Deniz Atasoy

    (Undersecretariat of Customs of Turkey)

  • Sweta C. Saxena

    (University of Pittsburgh)

Abstract

There is a consensus among scholars that overvalued exchange rates result in currency crises. This paper estimates the equilibrium real exchange rate for Turkey and finds 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 the Turkish exporters that lira’s overvaluation is responsible for Turkey’s uncompetitive exports. The paper also highlights the role for fiscal adjustment in macroeconomic stability

Suggested Citation

  • Deniz Atasoy & Sweta C. Saxena, 2005. "Misaligned? Overvalued? The Untold Story of the Turkish Lira," International Finance 0508002, EconWPA.
  • Handle: RePEc:wpa:wuwpif:0508002
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Egert, Balazs, 2005. "Equilibrium exchange rates in South Eastern Europe, Russia, Ukraine and Turkey: Healthy or (Dutch) diseased?," Economic Systems, Elsevier, vol. 29(2), pages 205-241, June.
    2. Patrick Imam & Camelia Minoiu, 2011. "The Equilibrium Exchange Rate of Mauritius: Evidence from Two Structural Models," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 47(6), pages 134-147, November.
    3. Kiptui, Moses C. & Ndirangu, Lydia, 2015. "Determinants of Equilibrium Real Exchange Rate and its Misalignment in Kenya: A Behavioral Equilibrium Exchange Rate Approach," MPRA Paper 70542, University Library of Munich, Germany, revised 06 Apr 2016.
    4. Mete Feridun, 2009. "Determinants of Exchange Market Pressure in Turkey: An Econometric Investigation," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 45(2), pages 65-81, March.
    5. Alper, Ahmet Murat & Civcir, İrfan, 2012. "Can overvaluation prelude to crisis and harm growth in Turkey," Journal of Policy Modeling, Elsevier, vol. 34(1), pages 112-131.
    6. Serkan Imisiker & Umit Ozlale, 2008. "Assessing Selectivity and Market Timing Performance of Mutual Funds for an Emerging Market: The Case of Turkey," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 44(2), pages 87-99, March.
    7. repec:cii:cepiei:2012-q2-130-4 is not listed on IDEAS
    8. Parantap Basu & Yoseph Getachew, 2017. "Redistributive Innovation Policy, Inequality and Efficiency," CEGAP Working Papers 2017_02, Durham University Business School.
    9. Patrick Imam & Camelia Minoiu, 2011. "The Equilibrium Exchange Rate of Mauritius: Evidence from Two Structural Models," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 47(6), pages 134-147, November.
    10. Toraganlı, Nazlı & Yazgan, M. Ege, 2016. "Exchange rates and firm survival: An examination with Turkish firm-level data," Economic Systems, Elsevier, vol. 40(3), pages 433-443.
    11. Serkan Imisiker & Umit Ozlale, 2008. "Assessing Selectivity and Market Timing Performance of Mutual Funds for an Emerging Market: The Case of Turkey," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 44(2), pages 87-99, March.

    More about this item

    Keywords

    Turkish lira; overvaluation; equilibrium real exchange rate; misalignment;

    JEL classification:

    • F1 - International Economics - - Trade
    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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