Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5083039 | International Review of Economics & Finance | 2017 | 12 Pages |
Abstract
After the invention of the Reserve Option Mechanism (ROM) by the Central Bank of Turkey (CBRT), it has been debated whether it can help decrease the volatility of foreign exchange rate. In this study, I apply a new microeconometric technique, the synthetic control method, in order to construct counterfactual foreign exchange rate volatility in the absence of ROM. I find that, USD/TRY rate is less volatile under ROM. However, it has not worked efficiently after CBRT raised interest rates as a reaction to the tapering tantrum in June 2013. Furthermore, it could have decreased the volatility of foreign exchange rate if CBRT had not increased interest rates as a reaction.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Hüseyin AytuÄ,