An analysis of equilibrium exchange rate with portfolio approach: The case of Turkey

GACENER ATIŞ A., UTKULU U.

IKTISAT ISLETME VE FINANS, cilt.26, sa.303, ss.65-84, 2011 (SSCI) identifier

  • Yayın Türü: Makale / Tam Makale
  • Cilt numarası: 26 Sayı: 303
  • Basım Tarihi: 2011
  • Doi Numarası: 10.3848/iif.2011.303.2753
  • Dergi Adı: IKTISAT ISLETME VE FINANS
  • Derginin Tarandığı İndeksler: Social Sciences Citation Index (SSCI)
  • Sayfa Sayıları: ss.65-84
  • Anahtar Kelimeler: Equilibrium exchange rate, Portfolio approach, Markov regime switching model, Linearity test, Diebold-Mariano test, Out-of-Sample forecasting, RATE MODELS, COINTEGRATION, TESTS, FIT
  • Dokuz Eylül Üniversitesi Adresli: Evet

Özet

An analysis of equilibrium exchange rate with portfolio approach: The case of Turkey The aim of this study is to identify the effect of portfolio preferences of Turkish decision mechanisms on the change on equilibrium exchange rate. The validity of portfolio approach was analysed by Markov Regime Switching Model. The study identifies a process with double regimes. Regime 1 represents a process in which the exchange rate is unstable, Regime 2 represents it stable. According to the results of analyses of the model, in regime 1, the portfolio preferences of decision mechanisms have no effect on the change on equilibrium exchange rate. Contrary to this result, regime 2 has a higher probability to explain the changes on equilibrium exchange rate. In this period, the crisis processes of regime periods were identified. The variables such as debt of private sector in foreign currency units, current account deficits and interest rates are determinants in the formation of equilibrium exchange rate.