Asymmetric exchange rate intervention under inflation targeting regimes: The case of Turkey, 2002-2008

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Tezin Türü: Yüksek Lisans

Tezin Yürütüldüğü Kurum: Orta Doğu Teknik Üniversitesi, İktisadi ve İdari Bilimler Fakültesi, İktisat Bölümü, Türkiye

Tezin Onay Tarihi: 2013

Öğrenci: AHMET BENLİALPER

Danışman: HASAN CÖMERT

Özet:

Especially, after the 2000s, many developing countries let exchange rates float and began implementing inflation targeting regimes based on mainly manipulation of expectations and aggregate demand. However, most developing countries implementing inflation targeting regimes experienced considerable appreciation trends in their currencies. Might have exchange rates been utilized as implicit tools even under inflation targeting regimes in developing countries? To answer this question and investigate the determinants of inflation under an inflation targeting regime, as a case study, this thesis analyzes the Turkish experience with the inflation targeting regime by using monthly data between 2002 and 2008. There are two main findings of this study. First, the evidence from a Vector Autoregressive (VAR) model suggests that the main determinants of inflation in Turkey during this period are supply side factors such as international commodity prices and the variation in exchange rate rather than demand side factors. Second, empirical findings suggest that the appreciation of the TL is related to the deliberate asymmetric policy stance of the Bank with respect to the exchange rate. Both the econometric analysis from a VAR model and descriptive statistics indicate that appreciation of the Turkish lira was tolerated during the period under investigation whereas depreciation was responded aggressively by the central bank.