MULTIRANK COINTEGRATION ANALYSIS OF TURKISH M1 MONEY DEMAND (1987Q1-2006Q3)

In our paper, we employ multivariate cointegration analysis to the Turkish M1 narrow money demand. The ex-post estimation results reveal that it is possible to identify a money demand vector in the cointegrating space as a priori hypothesized through economics theory. But some structural break points and parameter instabilities coincided with post-1994 economic crisis period and 2000-stabilization program cast some doubt upon whether the estimated model can represent all the period under investigation. Besides, a second potential vector found in the long-run variable space has been decomposed to reconcile it with excess aggregate demand reacting to the domestic inflation.Money Demand, Aggregate Demand, Turkish Economy, Cointegration,Identification, Super Exogeneity, Structural Breaks, Economic Policy

Monetary Transmission Mechanism In An Open Economy Framework: The Case Of Turkey

Monetary transmission mechanism (MTM) is an illuminating policy tool in appreciating the monetary policy implementations by policy makers upon various nominal and real factors of interest in the eyes of economic agents. Especially in an open economy such as Turkish economy highly exposed to the effects of capital flows on domestic business cycles with a liberalised capital account, control over policy aggregates may be difficult since many other economic policy implementations would be of great consequence on some other policy targets on macroeconomic income generation process and in providing price stability and external balance. In this respect, in our paper we aim to estimate the MTM for the Turkish economy. Our ex-post estimates for the period 1992-2004 using contemporaneous vector autoregression models such as impulse response analysis indicate that weakly exogeneous capital inflows appreciate the real effective exchange rate, and in turn lower the real interest rates and domestic inflation while increasing both the real output growth and also the stock exchange index considering an asset-price channel for the latter and vice versa. We find some significant effects of the courses of capital flows and real effective exchange rate on monetary policy variable in the transmission mechanism, and such a case may impose an endogeneous characteristic on the policy variable given also that both domestic real interest structure is highly sensible to the monetary policy and that monetary policy is subject to the structural breaks in the sense of so-called Lucas’ critique of contemporaneous economics.Monetary Transmission Mechanism, Turkish Economy, Capital Flows, Real Exchange Rate, Real Interest Rate, Inflation, Income Growth, Stock Exchange, Price Puzzle

An Empirical Model for the Turkish Trade Balance: New Evidence from ARDL Bounds Testing Analyses

In this paper, the determinants of the Turkish trade balance are tried to be analyzed in an empirical modelling approach. For this purpose, the contemporaneous ARDL-based bounds testing has been used to examine the existence of a long run co-integration relationship between the variables of our interest. The estimation results indicate that real exchange rate depreciations improves the trade balance in a strong and significant way, that domestic real income affects the trade balance negatively, and that trade balance is strongly improved due to an increase in foreign real income. No significant effect of crude oil prices can be observed on trade balance. The error correction modeling gives results in line with the long run findings of the co-integration analysis.Trade Balance, ARDL Bounds Testing Approach, Turkish Economy

Information Content Of Exchange Rate Volatility: Turkish Experience

This study constructs an empirical model of the volatility of the TL/US$ exchange rate for the Turkish economy during the post-2001 crisis period ending on August 2006. Employing the Exponential GARCH (EGARCH) estimation methodology of econometrics, we find that the volatility of a given shock to the exchange rate is highly persistent and the successive forecasts of the conditional variance converge to the steady state quite slowly. In addition, the conditional variance of the exchange rate reacts differently to a given negative shock than to a positive shock with equal magnitude. The plot of the News Impact Curve indicates that a foreign investor would face a higher uncertainty when there is an unanticipated increase in the exchange rate when compared to an unanticipated decrease

Stability Of Money Multipliers: Evidence From Turkey

This paper investigates whether the money multiplier process in the Turkish economy is stable and can be forecasted. Research results show that the processes which convert the base money supply into the final monetary aggregates are unstable and decrease the effectiveness of monetary policies pursued by the CBRT. In addition, the sub-components of the money multiplier do not support a stable money multiplier process, indicating that traditional monetarist prescriptions for the conduct of economic policy are not appropriate for the Turkish economy.&nbsp

Small Local Dynamic Fuzzy Logical Models for Large-Scale Power Systems

In the power system stability problems the primary actors in the mathematical system model are the differential equations defining the dynamic state variables of generation and load. These differential equations are coupled together by load flow equations. Mathematically the load flow equations are nonlinear algebraic equations. These differential equations and nonlinear algebraic equations form the mathematical Differential Algebraic Equations (DAE) model for the power system. The fuzzy set theory is commonly used in analysis of dynamical nonlinear systems. In this paper, we build a set of local dynamical fuzzy logic models for the differential equations, thus transforming the differential equations into nonlinear algebraic equations, the DAE into nonlinear algebraic equations. We try to simulate the system by solving the nonlinear algebraic equations rather than by solving the DAE model. We also compare the application of two types of dynamical fuzzy models: the discrete-time model and discrete-event model in this approach. First we explain the approach by a small DAE example, and then we apply it to a 10-bus power system

Improving Voltage Stability by Reactive Power Reserve Management

The amount of reactive reserves at generating stations is a measure of the degree of voltage stability. With this perspective, an optimized reactive reserve management scheme based on the optimal power flow is proposed. Detailed models of generator limiters, such as those for armature and field current limiting must be considered in order to utilize the maximum reactive power capability of generators, so as to meet reactive power demands during voltage emergencies. Participation factors for each generator in the management scheme are predetermined based on the voltage-var (V-Q) curve methodology. The Bender\u27s decomposition methodology is applied to the reactive reserve management problem. The resulting effective reserves and the impact on voltage stability are studied on a reduced Western Electric Coordinating Council system. Results prove that the proposed method can improve both static and dynamic voltage stability