Browsing by Subject "Exchange Rates"

Now showing 1 - 4 of 4

Open Access
ECB policy response to the Euro
(2011) Demir, İshak
The exchange rate is an important part of transmission mechanism in the determination of monetary policy because movements in the exchange rate has signiÖcant e§ect on the macroeconomy. Measuring the reaction of monetary policy to the movements in exchange rate has some di¢ culties due to the simultaneous response of monetary policy on the exchange rate and the possibility that both variables respond several other variables. This study will use an identiÖcation method based on the heteroscedasticity in the high-frequency data. In particular, shifts in the importance of exchange rate relative to monetary policy shocks, and the estimated changes in the covariance between the shocks that result, allow us to measure the reaction of interest rates to changes in exchange rates. This study comes up with unbiased estimates with heteroscedasticity based identiÖcation approach and results of this paper suggest that ECB systematically respond to the exchange rate movements but that quantitative e§ects are small. The empirical results indicate that a 1 point rise (fall) in the exchange rate tends to decrease (increase) the three-month interest rate by around 20 basis points. Small and negative reaction coe¢ cient implies that ECB may respond to the movements in exchange rate only to the extent warranted by their impact on the macroeconomy, since it a§ects the expected ináation and future output path.
Open Access
Implications of global financial crisis on inflation targetting framework
(2012) Yağcıbaşı, Özge Filiz
Aside from its devastating effects on global economy, global financial crisis has also shaken the mainstream economic theory. After the crisis, policies implemented by governments and Central Banks, issues of financial stability, impacts of international capital flows and exchange rates have become the center of macroeconomic research. This thesis examines the impact of global financial crisis on the IT framework. The aim is to discuss the imperfections and defections in the framework and propose extensions. In this context, a small open economy DSGE model, calibrated for Turkey during 2003- 2012 is proposed. The base model is extended to capture dynamics of Turkish economy better. Since, trade and credit channels of transmission mechanism of crisis are the most powerful channels for the contagion of the crisis to Turkish economy, inclusion of net international investment position (to the problems of households and entrepreneurs) and imported capital good (to the production function) strengthen the explanatory power of the model considerably. Moreover, to address whether allowing Central Bank to respond exchange rates yields gains in terms of output and inflation stabilization, an augmented Taylor rule which incorporates exchange rates is constructed. Responses under the benchmark model where Central Bank uses a traditional Taylor rule and an augmented Taylor rule are obtained. To provide a reference in interpreting the findings of the model, a Vector Auto Regression analysis is performed with interest rates, inflation, output level and exchange rates as endogenous variables. Finally, results of the model experiments and VAR are compared. The results indicate that, the model with the augmented Taylor rule can help to smooth business cycle fluctuations more effectively than conventional Taylor rule but, in some cases, Central Bank may encounter with a tradeoff between output gap and inflation.
Open Access
Panel cointegration analysis to exchange rate determination : monetary model versus Taylor rule model
(2009) Kutlu, Vesile
This thesis examines the validity of the monetary model and the Taylorrule model in determining exchange rates in the long run. The monetary model and the Taylor-rule model are tested using the US dollar exchange rates over 1980:01-2007:04 periods for 13 industrialized countries. Johansen Fisher Panel cointegration technique provides evidence that there exist a unique cointegration relationship between the nominal exchange rates and a set of fundamentals implied by the monetary model and the Taylor rule model. The cointegrating coefficient estimates for the monetary model and the Taylor rule model are found by using panel dynamic ordinary least square (DOLS) estimator. The estimation results show that the effects of the monetary and the Taylor rule fundamentals on exchange rates are not the same as what the theory suggests. Overall, the findings of this thesis imply that there is no support for the monetary model and there is little support for Taylor-rule model in explaining exchange rates.
Open Access
The relative effects of crude oil price and exchange rate on petroleum product prices: evidence from a set of Northern Meditteranean countries
(Elsevier, 2014) Berument, Hakan; Sahin, A.; Sahin, S.
This paper provides a set of empirical evidence from five Northern Mediterranean countries that are subject to similar refinery reference prices regarding the relative sensitivity of crude oil prices and exchange rate on (pre-tax) petroleum product prices. The empirical evidence reveals that a one percent increase in exchange rate (depreciation) increases petroleum product prices less than a one percent increase in crude oil prices does in the long run. In the short run, however, a one percent increase in exchange rate increases petroleum product prices more than a one percent increase in crude oil prices does. © 2014 Elsevier B.V. All rights reserved.