The role of expectations for currency crisis dynamics - the case of the Turkish lira

Beckmann, Joscha and Czudaj, Robert L. (2022): The role of expectations for currency crisis dynamics - the case of the Turkish lira.

Abstract

This paper examines whether and how expectations have contributed to the turbulent path of the Turkish lira since 2008. We derive uncertainty measures surrounding GDP growth, inflation, the interest rate, and exchange rates based on survey data from Consensus Economics. Our results illustrate that forecasts have affected realized exchange rates and stock market returns via increased uncertainty. We also show that expectations regarding monetary policy have changed throughout the sample period. In line with a gradual adjustment of expectations professionals have accounted for the violation of the Taylor rule.

• Item Type: MPRA Paper
• Language: English
• Keywords: disagreement; expectations; foreign exchange; survey data; Taylor rule; Turkish lira; uncertainty
• Subjects: F - International Economics > F3 - International Finance > F31 - Foreign Exchange; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics

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