Exchange Rate Movements, Inflation Expectations, and Currency Substitution in Turkey
Summary:
This paper contains an empirical analysis of currency substitution in Turkey: a simple relationship between the share of foreign currency holdings in M2X on one side and movements in the exchange rate or inflation on the other is derived from a two-stage portfolio choice model. This relationship is estimated by band spectrum regression which allows to remove from the data the short-term cyclical components. The results show that the relationship between currency substitution depends mainly on long-term movements in the exchange rate, while the effect of inflation on currency substitution is not statistically significant.
Series:
Working Paper No. 1995/111
Subject:
Currencies Dollarization Exchange rates Foreign exchange Inflation Monetary policy Money Nominal anchors Prices
English
Publication Date:
November 1, 1995
ISBN/ISSN:
9781451853414/1018-5941
Stock No:
WPIEA1111995
Pages:
21
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