Does currency substitution affect exchange rate uncertainty? the case of Turkey

Levent, Korap (2007): Does currency substitution affect exchange rate uncertainty? the case of Turkey. Published in: Journal of Qafqaz University , Vol. 20, (2007): pp. 133-141.

Abstract

In this paper, we investigate whether the currency substitution can affect the exchange rate uncertainty for the Turkish economy. Considering the whole time period 1987M01-2006M12 as well as thesub-periods 1987M01-1999M12 and 2001M03-2006M12 for sensitivity analysis, our estimation results employing contemporaneous exponential GARCH (EGARCH) methodology of Nelson (1991) indicate that currency substitution leads to the exchange rate uncertainty. Besides, conditional variance reacts more to past positive shocks than to negative innovations of equal size.

• Item Type: MPRA Paper
• Language: English
• Keywords: Exchange rate ; dollarization ; currency substitution ; inflation ; exponential GARCH models ; conditional variance ; leverage effect ; Turkish economy
• Subjects: F - International Economics > F3 - International Finance > F31 - Foreign Exchange

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