Do capital flows improve macroeconomic performance in emerging markets? The Turkish experience

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Abstract

This study examines the effects of capital inflows on the macroeconomic performance in an emerging, small open economy-Turkey. Using monthly data from 1992:01 to 2001:06 and a recursive vector autoregression model, we find that positive innovations in capital inflows appreciate the domestic currency, and increase output and money supply, but decrease interest rates and prices in the short run. We also find that the exchange rate regime does not influence the effects of capital flows on macroeconomic performance. Implications of the findings for policymakers are analyzed.

Source Title

Emerging Markets Finance and Trade

Publisher

Routledge

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Citation

Published Version (Please cite this version)

Language

English