In this study, determinants and the evolution of the exchange rate passthrough
to domestic inflation in the Turkish economy is analyzed. The analyses
cover the 1987-2003 period. In the analyses, single equation &ldquo / Error Correction
Models&rdquo / are used to estimate the exchange rate pass-through. Estimation results
suggest that alike other emerging countries, the degree of exchange rate passthrough
to domestic prices is high and the pass-through is completed in a very
short time span. Estimations results also indicates that the main factors to account
for high pass-through are the past currency crises and the high degree of openness
of the economy. These factors create the ground for the indexation behavior of
agents. Although, above-mentioned factors are the main determinants of the
degree of exchange rate pass-through, the persistency and the volatility of
exchange rates can significantly affect the short run dynamics of the pass-through.
The results imply that even if the pass-through slows down due to the changing
pattern of exchange rates, to achieve the low and stable inflation in the long run,
fundamental factors that exacerbate the link between exchange rates and prices
should change.
| Identifer | oai:union.ndltd.org:METU/oai:etd.lib.metu.edu.tr:http://etd.lib.metu.edu.tr/upload/12604743/index.pdf |
| Date | 01 January 2003 |
| Creators | Alper, Koray |
| Contributors | Gaygisiz, Esma |
| Publisher | METU |
| Source Sets | Middle East Technical Univ. |
| Language | English |
| Detected Language | English |
| Type | M.S. Thesis |
| Format | text/pdf |
| Rights | To liberate the content for public access |
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