Browsing by Subject "Exchange rate"
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Item Open Access The asymmetric effects of crude oil prices and exchange rates on diesel prices for 27 European countries(Sage Publications India Pvt. Ltd., 2021-04-16) Yuksel Haliloglu, E.; Berument, M. HakanMany studies have examined the asymmetric effect of US dollar-denominated crude oil prices on petroleum product prices. The ‘rockets and feathers’ argument suggests that a crude price increase raises petroleum product prices more than a corresponding decrease in crude prices lowers product prices. However, for the countries that do not use the US dollar as a medium of exchange, petroleum product prices are also affected by the exchange rates. This paper analysed the asymmetric effects of both US dollar-denominated crude oil prices and exchange rates on local currency-denominated diesel prices for 27 European countries in the short run as well as long run. The overall empirical evidence suggests that, in the short run, diesel prices react more to crude oil price increases than to a decrease, parallel to the ‘rockets and feathers’ argument. However, contrary to that argument, the long-run adjustment is the opposite. As for exchange rate shocks, again the ‘rockets and feathers’ argument holds and diesel prices respond more to exchange rate depreciation than appreciation in the short and long run.Item Open Access Asymmetric effects of monetary policy shocks on economic performance: empirical evidence from Turkey(Routledge, 2016) Ülke, V.; Berument, HakanThis study investigates the asymmetric effects of monetary policy shocks on the macroeconomic variables of exchange rate, output and inflation for an emerging economy ‒ Turkey ‒ by using monthly data between 1990 and 2014. We employ the innovative nonlinear vector autoregressive model of Kilian and Vigfusson (2011), which allows us to observe the effect of different stances (tight or loose) and different sizes (small or large) of monetary policy actions. Our empirical evidence reveals that tight monetary policy, which, in this case, is captured with a positive shock to interest rate, decreases exchange rate, output and prices, as economic theory suggests. Loose monetary policy, which is captured with a negative shock to interest rate, has the opposite effect on these variables. However, the effects of loose monetary policy are weaker than the effects of tight monetary policy because loose monetary policy shocks are less effective than tight monetary policy shocks. Moreover, as the magnitude of a shock increases, the difference between the effects of tight and loose monetary policy policies also increases. © 2015 Taylor & Francis.Item Open Access Calendar anomalies in the Turkish foreign exchange markets(Routledge, 2003) Aydoğan, K.; Booth, G. G.This paper investigates calendar anomalies in the Turkish foreign exchange markets during 1986-1994 period. Changes in the free market and official daily exchange rates between the Turkish lira (TL) and US dollar (USD) and the German mark (DM) are examined for empirical regularities on different days of the week, around the turn of the month and before holidays. The findings reveal that free market rates exhibit day-of-the-week and week-of-month effects. In addition free market DM returns display a holiday anomaly. These calendar anomalies are explained by cash disbursement patterns, together with currency substitution in the economy. The impact of treasury auctions and banks' management of liquidity on day-of- the-week effect is also discussed.Item Open Access Currency forecasting: an investigation of extrapolative judgement(Elsevier, 1997) Wilkie-Thomson, M. E.; Önkal-Atay, D.; Pollock, A. C.This paper aims to explore the potential effects of trend type, noise and forecast horizon on experts' and novices' probabilistic forecasts. The subjects made forecasts over six time horizons from simulated monthly currency series based on a random walk, with zero, constant and stochastic drift, at two noise levels. The difference between the Mean Absolute Probability Score of each participant and an AR(1) model was used to evaluate performance. The results showed that the experts performed better than the novices, although worse than the model except in the case of zero drift series. No clear expertise effects occurred over horizons, albeit subjects' performance relative to the model improved as the horizon increased. Possible explanations are offered and some suggestions for future research are outlined.Item Open Access Day of the week effect on foreign exchange market volatility: evidence from Turkey(Elsevier Inc., 2007) Berument, Hakan; Coskun, M. N.; Sahin, A.This paper assesses the day of the week effect of the daily depreciation of the Turkish lira (TL) against the US dollar (USD) and its volatility. The empirical evidence from Turkey presented here suggests that Thursdays are associated with higher and Mondays with lower depreciation rates compared to those of Wednesdays. Moreover, Mondays and Tuesdays are associated with higher volatility than Wednesdays. © 2006 Elsevier B.V. All rights reserved.Item Open Access Determinants of workers' remittances: Turkish evidence from high-frequency data(Routledge, 2006) Alper, A. M.; Neyapti, B.The potential importance of workers remittances (WR) as a relatively stable source of foreign exchange has been growing across the world. We present time-series evidence on the determinants of WR in a large developing country, Turkey. Using yearly data, Aydas et al. (2005) show that WR flows to Turkey are significantly influenced by the growth rate of the home gross domestic product (GDP); the level of GDP in both home and host countries; interest rate differentials between home and host countries; the black market exchange rate; inflation; and political stability. This study utilizes higher-frequency data to further investigate the issue from both long-term and short-term perspectives. The new evidence supports the earlier findings regarding the long-run investment motive, but it also shows that consumption smoothing is an effective short-run motive for sending remittances to Turkey. © 2006 M.E. Sharpe, Inc. All rights reserved.Item Open Access The dynamics of a newly floating exchange rate: the Turkish case(Routledge, 2006) Ardıç, O. P.; Selçuk, F.In recent years, many emerging market economies have switched or are in the process of switching to a floating exchange rate regime. Most of these economies have a history of high inflation and a high level of foreign currency denominated debt. Therefore, the stability of the exchange rate and the dynamics of its volatility are more crucial than before. This paper analyses the dynamics of exchange rate in Turkey in the aftermath of recent float in February 2001. The Turkish experience is a particularly important one, and provides valuable lessons for other countries as the Central Bank is trying to simultaneously contain the volatility of exchange rate and pursue an implicit inflation targeting policy. The reported findings indicate that the Central Bank policies, accompanied with favourable external factors, were effective in taming the volatility of the exchange rate in a relatively short period of time. However, there is a significant real appreciation of the currency during the same period. Given the high level of public debt and real interest rates, the current state of the economy is very susceptible to any adverse shocks. © 2006 Taylor & Francis.Item Open Access The effectiveness of foreign exchange interventions under a floating exchange rate regime for the Turkish economy: a post-crisis period analysis(Routledge, 2006) Akinci, Ö.; Çulha, O. Y.; Özlale, Ü.; Şahinbeyoǧlu, G.The reported study has two purposes: first, it attempts to improve the literature on foreign exchange interventions of the central banks for the emerging market economies, an area not previously studied in detail. The Turkish economy in the post-crisis period constitutes a good example in this context. Second, it proposes a new methodology, a time-varying parameter model, to analyse the effectiveness of the foreign exchange interventions. When the results from such an exercise are compared with those obtained from an event-study analysis, it is found that purchase-based interventions seem to be successful, especially after stabilization of the financial markets. In that sense, an asymmetry is detected regarding the effectiveness of interventions. Concerning the relationship between interest rates and exchange rates, it is found that the uncovered interest rate parity condition operates in an unconventional way, supporting the views put forward by recent emerging markets literature. © 2006 Taylor & Francis.Item Open Access Effectiveness of the reserve option mechanism as a macroeconomic prudential tool: evidence from Turkey(Routledge, 2015) Sahin, A.; Dogan, B.; Berument, HakanThis article assesses the effectiveness of a novel macroprudential tool – the reserve option mechanism (ROM) – which Turkey’s central bank developed during the post-2008 period and has employed to control the risk associated with excessive capital flows. We assess how capital flows have affected economic variable changes since the introduction and usage of the ROM. Empirical evidence gathered from Turkey suggests that the tool decreases the effect of capital flow on capital flow (positive shock to capital flow dies out faster or becomes less persistent) and diminishes the effects of capital flow shocks on exchange and interest rates. © 2015 Taylor & Francis.Item Open Access The effects of exchange rate risk on economic performance: the Turkish experience(Routledge, 2004) Berument, Hakan; Dincer, N. N.This study examines the effects of real exchange rate risk on the economic performance for an emerging, small open economy: Turkey. When the ratios of the total foreign exchange liabilities of the Central Bank of the Republic of Turkey (CBRT) to: (1) total reserves; (2) the CBRT's reserves; and (3) the CBRT's total Turkish lira liabilities are taken proxy of exchange rate risk, the empirical evidence suggests that the increase in exchange rate risk causes a depreciation in the real exchange rate, an increase in prices and a decrease in output. © 2004 Taylor and Francis Ltd.Item Open Access Effects of trend strength and direction on performance and consistency in judgmental exchange rate forecasting(Elsevier, 2013) Thomson, M. E.; Pollock, A. C.; Gönül, M. S.; Önkal D.Using real financial data, this study examines the influence of trend direction and strength on judgmental exchange rate forecasting performance and consistency. Participants generated forecasts for each of 20 series. Half of the participants also answered two additional questions regarding their perceptions about the strength and direction of the trend present in each of the series under consideration. The performance on ascending trends was found to be superior to that on descending trends, and the performance on intermediate trends was found to be superior to that on strong trends. Furthermore, the group whose attention was drawn to the direction and strength of each trend via the additional questions performed better on some aspects of the task than did their “no-additional questions” counterparts. Consistency was generally poor, with ascending trends being perceived as being stronger than descending trends. The results are discussed in terms of their implications for the use and design of forecasting support systems.Item Open Access Effects of USD-Euro parity on a small open economy: evidence from Turkey(Routledge, 2008) Berument, Hakan; Yucel, E. M.This study assesses the effect of USD-Euro parity on a small open economy where exports are predominantly denominated in Euros and imports are denominated in USD. Empirical evidence from Turkey suggests that a positive change in the USD value of the Euro appreciates the local currency, decreases inflation and increases output.Item Open Access Evaluating predictive performance of judgemental extrapolations from simulated currency series(Elsevier, 1999) Pollock, A. C.; Macaulay, A.; Önkal-Atay, D.; Wilkie-Thomson, M. E.Judgemental forecasting of exchange rates is critical for financial decision-making. Detailed investigations of the potential effects of time-series characteristics on judgemental currency forecasts demand the use of simulated series where the form of the signal and probability distribution of noise are known. The accuracy measures Mean Absolute Error (MAE) and Mean Squared Error (MSE) are frequently applied quantities in assessing judgemental predictive performance on actual exchange rate data. This paper illustrates that, in applying these measures to simulated series with Normally distributed noise, it may be desirable to use their expected values after standardising the noise variance. A method of calculating the expected values for the MAE and MSE is set out, and an application to financial experts' judgemental currency forecasts is presented.Item Open Access Evaluating probabilistic forecasting accuracy of exchange rates(1996) Öztin, ŞuleThis study aims to explore various dimensions of probabilistic forecasting accuracy. In particular, the effects of using dichotomous format on the performance of semi-experts’ and novices’ probabilistic forecasts of exchange rates and currencies are examined. Semiexperts are comprised of banking and finance professionals in the finance sector. Novice group consists of MBA students from the Faculty of Business Administration at Bilkent University. The results suggest that the dichotomous format used to elicit the probabilistic forecasts has a differential effect on the p>erformance of semi-experts and novices. Implications of these findings for financial forecasting are discussed and directions for future research are given.Item Open Access Evaluating strategic directional probability predictions of exchange rates(2010) Pollock, A.C.; Macaulay, A.; Thomson, M.E.; Gönül, M.S.; Önkal, D.The current paper aims to examine strategic predictions (with forecast horizons greater than six months) via the empirical probability (EP) technique. This technique was proposed initially to examine short-term tactical predictions (with forecast horizons less than three months), as set out in Pollock et al. (2005). The proposed procedure is based on the hypothesis that changes in logarithms of daily exchange rates follow a normal distribution over short horizons (of 10 to 30 days), but longer term forecast evaluation requires consideration of cumulative parameters consistent with changing means and standard deviations arising from primary and secondary trends. It is shown that ex-post EPs can be obtained for any predictive horizon above 30 days (e.g., 180 days) by using a combination of shorter (e.g., 20-day) Student t distributions. The procedure is illustrated using daily Euro/USD series from 4 January 1999 to 29 January 2008 to evaluate a set of Euro/USD directional probability predictions. © 2010 Inderscience Enterprises Ltd.Item Open Access Exchange rate exposure and real exports(Routledge, 2010) Solakoglu, M. N.This study investigates the relationship between real exports and exchange rate risk for Turkish firms between 2001 and 2003. Different from earlier studies, the analysis is conducted at the firm level with an exchange rate risk specific to the individual firm. Results show that real exports are negatively impacted by an increase in exchange rate risk. In addition, size of the trade volume and the dependence on domestic market for revenue generation are found to be important for the aforementioned relationship.Item Open Access Exchange rate risk and interest rate: a case study for Turkey(Springer New York LLC, 2003) Berument, Hakan; Günay, A.This paper examines the effect of exchange rate risk on interest rates within the uncovered interest rate parity condition for Turkey. When the interest rate is measured with the Treasury auction interest rate and the exchange rate risk is measured with the conditional variance of the exchange rate, then we found that there is a positive relation between the exchange rate risk and interest rate with the data from December 1986 to January 2001.Item Open Access Exchange rate volatility and exports: a firm-level analysis(Routledge, 2008) Solakoglu, M. N.; Solakoglu, E. G.; Demirag, T.The relationship between real exports and exchange rate volatility is investigated using panel data analysis at the firm level. Results indicate that there is no negative or positive relationship between volatility and real exports. In addition, firm size and level of international activity do not influence the size and significance of the volatility effect on exports. However, there is some evidence that firms use import revenue to lower their exchange rate exposure.Item Open Access Impact of macroeconomic indicators on short selling: evidence from the Tokyo stock exchange(Elsevier Inc., 2012) Solakoğlu, M. Nihat; Orhan, Mehmet; Gregoriou, G. N.This chapter examines the existence of cointegration between short selling volume and the Nikkei 225 Index to investigate the permanent relation between the two. For this purpose, the Japanese financial markets with monthly data from November 2005 to October 2009 were examined to document if a causality relation exists between short selling volume and macroeconomic variables, such as GDP, bond yield, and exchange rate, as well as the Nikkei 225 Index. Given the characteristics of Japanese short sellers, it is expected that a causal relationship exists between macroeconomic variables and short selling volume, which indicates that Japanese short sellers are informed traders. Based on this finding, it can also be assumed indirectly that the tipping hypothesis does not apply to Japanese short sellers. In addition, the existence of cointegration between short selling volume and the Nikkei 225 Index are investigated to determine whether a long run relationship exists between the two. The study found that the short selling volume, the Nikkei 225 Index, and the exchange rate have unit roots and are thus nonstationary; however, the bond yield rate is stationary. Using the Granger causality test, it also showed bidirectional causality between short selling volume and the Nikkei 225 Index. However, there is no causality between short selling volume and GDP, as well as bond yield rate. The findings also document that exchange rate Granger causes a short selling volume, but short selling volume does not Granger cause exchange rate. These findings thus indicate that the short sellers' information set contains the Nikkei 225 Index and exchange rate movements, but not macro fundamentals. The results also document the permanent long run relationship between short selling volume and the Nikkei 225 Index. © 2012 Elsevier Inc. All rights reserved.Item Open Access The influence of trend strength on directional probabilistic currency predictions(Elsevier, 2003) Thomson, M. E.; Önkal-Atay, D.; Pollock, A. C.; Macaulay, A.An experiment is reported which compares the judgmental forecasting performance of experts and novices using simulated currency series with differing trend strengths. Analyses of directional probability forecasts reveal: (1) significant effects of trend strength on all aspects of predictive performance being studied, with evidence for the hard-easy effect where overconfidence is exhibited on weak (i.e., more difficult) trends, while underconfidence is shown on strong (i.e., less difficult) trends; (2) lower performance of experts on relative accuracy and profitability measures, reflecting experts' resistance to strong trends; (3) better overall performance on negative trends; and (4) superior performance of composite forecasts. Possible explanations are offered for these results and future research directions are outlined.