This study investigates the determinants and effects of currency and asset substitution in Turkey using quarterly data from 1987:1 to 2002:4. The empirical results from the application of Johansen procedure to a four-variable
system containing currency-asset substitution proxy (M2Y/M2)), real income, real exchange rate, and ratchet effect proxy (past peak values of the depreciation of
the real exchange rate) suggest the presence of a single cointegration vector among the variables. The results further suggest the endogeneity of the degree of currency substitution for the parameters of the cointegration vector. According to the theory consistent and data-acceptable long-run relationship between the variables, there is a strong ratchet (hysteresis) effect in currency-asset
substitution in Turkey. The study contains also the policy implications of both currency substitution and the ratchet effect arising from real exchange rate change shocks in the Turkish economy.
| Identifer | oai:union.ndltd.org:METU/oai:etd.lib.metu.edu.tr:http://etd.lib.metu.edu.tr/upload/2/1002369/index.pdf |
| Date | 01 September 2003 |
| Creators | Tasdemir, Ozlem - |
| Contributors | Ozmen, Erdal - |
| 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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