Can overvaluation prelude to crisis and harm growth in Turkey

Alper A. M., CİVCİR İ.

JOURNAL OF POLICY MODELING, cilt.34, sa.1, ss.112-131, 2012 (SSCI) identifier identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 34 Sayı: 1
  • Basım Tarihi: 2012
  • Doi Numarası: 10.1016/j.jpolmod.2011.08.023
  • Dergi Adı: JOURNAL OF POLICY MODELING
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI), Scopus
  • Sayfa Sayıları: ss.112-131
  • Anahtar Kelimeler: Equilibrium real exchange rate, Behavioral equilibrium exchange rate, Misalignment, Turkey, NUMERICAL DISTRIBUTION-FUNCTIONS, AUTOREGRESSIVE TIME-SERIES, REAL EXCHANGE-RATES, RELATIVE PRICE, UNIT-ROOT, COINTEGRATION, PRODUCTIVITY, MODEL
  • Ankara Üniversitesi Adresli: Evet

Özet

This paper estimates the equilibrium real exchange rate of the Turkish lira to evaluate whether or not the overvaluation results in currency crisis and low growth rate over the period from the first quarter of 1987 to the fourth quarter of 2010. We follow the behavioral equilibrium exchange rate model, where the equilibrium real exchange rate depends on both the balance of payments approach and the Balassa-Samuelson hypothesis. The results indicate that although large and persistent overvaluation contributes to a crisis in Turkey, a relatively small overvaluation, contrary to both the Washington Consensus view and the Rodrik view, promotes the growth of Turkish economy. (C) 2011 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.