28 research outputs found
Exchange Rate Dynamics under Alternative Optimal Interest Rate Rules
We explore the role of interest rate policy in the exchange rate determination process. Specifically, we derive exchange rate equations from interest rate rules that are theoretically optimal under a few alternative settings. The exchange rate equation depends on its underlying interest rate rule and its performance could vary across evaluation criteria and sample periods. The exchange rate equation implied by the interest rate rule that allows for interest rate and inflation inertia under commitment offers some encouraging results â exchange rate changes âcalibratedâ from the equation have a positive and significant correlation with actual data, and offer good direction of change prediction. Our exercise also demonstrates the role of the foreign exchange risk premium in determining exchange rates and the difficulty of explaining exchange rate variability using only policy based fundamentals.Taylor Rule, exchange rate determination, mean squared prediction error, direction of change, foreign exchange risk premium
Trade Openness, Market Competition, and Inflation: Some Sectoral Evidence from OECD Countries
This study evaluates the role market competition plays in determining inflation based on sector-level data from OECD countries. In theory, trade openness can affect inflation through changes in market competitiveness and productivity. Nonetheless, previous empirical studies often fail to account for productivity effects, and their results may overstate the role of market competition. This study shows that inflation decreases with greater market competitiveness even after controlling for productivity effects. Indeed, when market competition and productivity effects are both accounted for, trade openness becomes insignificant in explaining inflation. The results support that changes in market competitiveness and productivity are the main channels through which trade openness affects inflation.trade openness, inflation, market structure, static panel, dynamic panel
TĂŒrkiye'de AĆırı Kredi GeniĆlemeleri ve Belirleyicileri
Using different credit measures, this study identifies the credit booms in Turkey that have occurred after December 2002, and examines their determinants. We find that the primary factors that have a strong correlation with the probability of a credit boom are the changes in the slope of the yield curve, reel exchange rate, US interest rate and net capital inflows. The results imply that these factors should be considered as important elements in forecasting such events that could threaten financial stability
TĂŒrkiye'de AĆırı Kredi GeniĆlemeleri ve Belirleyicileri
Using different credit measures, this study identifies the credit booms in Turkey that have occurred after December 2002, and examines their determinants. We find that the primary factors that have a strong correlation with the probability of a credit boom are the changes in the slope of the yield curve, reel exchange rate, US interest rate and net capital inflows. The results imply that these factors should be considered as important elements in forecasting such events that could threaten financial stability
Stock return comovement and systemic risk in the Turkish banking system
This paper investigates the evolution of systemic risk in the Turkish banking sector over the past two decades using comovement of banksâ stock returns as a systemic risk indicator. In addition, we explore possible determinants of systemic risk, the knowledge of which can be a useful input into effective macroprudential policymaking. Results show that the correlations between bank stock returns almost doubled in 2000s in comparison to 1990s. The correlations decreased somewhat after 2002 and increased again as a result of the 2007-2009 financial crisis. Main determinants of systemic risk appear to be the market share of bank pairs, the amount of non-performing loans, herding behavior of banks, and volatilities of macro variables including the exchange rate, U.S. T-bills, EMBI+, VIX, and MSCI emerging markets index
Stock return comovement and systemic risk in the Turkish banking system
This paper investigates the evolution of systemic risk in the Turkish banking sector over the past two decades using comovement of banksâ stock returns as a systemic risk indicator. In addition, we explore possible determinants of systemic risk, the knowledge of which can be a useful input into effective macroprudential policymaking. Results show that the correlations between bank stock returns almost doubled in 2000s in comparison to 1990s. The correlations decreased somewhat after 2002 and increased again as a result of the 2007-2009 financial crisis. Main determinants of systemic risk appear to be the market share of bank pairs, the amount of non-performing loans, herding behavior of banks, and volatilities of macro variables including the exchange rate, U.S. T-bills, EMBI+, VIX, and MSCI emerging markets index
Lhomme Pierre, Mariage et fecondité, Téqui, Paris, 1935.; Grimaud Charles, Foyers brises, aux veufs, aux veuves, aux abandonnés, Téqui, Paris, 1936.
How do regulatory changes in a foreign country affect the lending growth in another country? This paper addresses this question using bank-level data from Turkey and macroprudential measures from fifty-six countries over a sample period of 2006â13. We offer evidence for the existence of the inward transmission of foreign prudential regulations by showing that the macroprudential tightening abroad leads to lending growth by the banks in Turkey. We find that domestic affiliates of foreign banks play a more prominent role in this transmission. We show that the existence and the magnitude spillovers differ across bank characteristics or the prudential instruments. Finally, our results indicate that the spillovers depend on the financial cycles
THE ROLE OF EXCHANGE RATES IN MONETARY POLICY RULE: THE CASE OF INFLATION TARGETING COUNTRIES
This paper examines two main issues for the case of inflation targeting countries. The first is to investigate whether monetary authorities react to the exchange rate movements, in addition to inflation and output gap, as in simple monetary policy rule. The second is to investigate whether reactions to the exchange rates have any implications for the inflation targeting performance. The main result of the analysis indicates that some inflation targeting countries react to the exchange rate movements. The policy to stabilize the exchange rate movements helps achieve the inflation target; however, this is not robust across different specifications. In contrast, the real exchange rate variability worsens the inflation targeting performance. The other main finding from the panel data model is that the deviation of the inflation from the target rate exhibits a high and systematic persistence. Additionally, central banks with constant inflation targeting are more successful controlling inflation in the target path compared to banks with a nonconstant inflation target. Finally, restriction on capital controls helps the inflation targeting performance