The Fear of Floating and the Turkish Experience

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Title: The Fear of Floating and the Turkish Experience
Author: Onder, Yusuf
Advisors: Tom Gerig, Committee Member
John S. Lapp, Committee Member
Douglas K. Pearce, Committee Chair
Abstract: This paper gives a brief description of the fear of floating concept and discusses the Turkish fear of floating experience. Using the intervention data released by the Central Bank of Turkey, we then estimate a reaction function for the Central Bank's interventions, conducted between the years 2002 — 2006. We make use of a multinomial logistic model to estimate a reaction function for both buy and sell interventions separately. Our results show that the TRL⁄USD exchange rate level, deviations from the trend and exchange rate market volume are all important factors in the Central Bank's reaction function. The Central Bank's response exhibits differences between selling USD interventions and buying USD interventions. Moreover, we also find that the Central Bank is more responsive to higher volatility in the case of depreciating Turkish New Lira environment.
Date: 2006-07-05
Degree: MA
Discipline: Economics

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