Ankara : The Department of Economics, İhsan Doğramacı Bilkent University, 2012.Thesis (Master's) -- Bilkent University, 2012.Includes bibliographical references leaves 35.Following the recent financial crisis, reserve requirements have become a policy
instrument preferred in many emerging markets such as China, Brazil
and Turkey for various purposes. Therefore, the formulating a theoretical
framework to study the policy effectiveness remains an important issue. In
this thesis, I develop a DSGE model with the financial accelerator mechanism
so as to see the effectiveness of reserve requirement in small open economies,
especially in influencing the external imbalances. External imbalances can
either be interpreted as current account imbalances or its mirroring capital
account imbalances. The main channel through which the external balances
play a role is via the banking sector, which is modelled as engaging in international
borrowing. This framework allows examination of the responses of the
external imbalances to shocks to the reserve requirement ratio As a result,
higher reserve requirements make domestic borrowing cheaper than foreign
borrowing and by this way, changes in net foreign liabilities create a current
account surplus. Thus, a country with current account deficit can use reserve
requirements to readjust its external imbalances.Dalkıran, Dilşat TugbaM.S
