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How Important Are Nominal Shocks For Real Exchange Rate Fluctuations? Evidence From Inflation Targeting Emerging Market Economies

Mehmet Ekinci, Fatma Erdem and Zübeyir Kılınç
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Zübeyir Kılınç: Central Bank of Turkey

No 286, EY International Congress on Economics II (EYC2015), November 5-6, 2015, Ankara, Turkey from Ekonomik Yaklasim Association

Abstract: This study compares the importance of the nominal shocks in explaining the real exchange rate fluctuations before and after the adoption of inflation targeting regime in emerging market economies. We follow the structural VAR methodology proposed by Clarida and Gali (1994) to identify the macroeconomic shocks that determine fluctuations in relative output growth, relative inflation and the real exchange rate. The structural decomposition shows that real shocks account for most of the variation in the real exchange rate. Furthermore, findings indicate that the explanatory power of the nominal shocks in the real exchange rate fluctuations have increased after the implementation of the inflation targeting regime.

Keywords: Okun Kanunu; İşsizlik; Büyüme; Dinamik Panel Veri (search for similar items in EconPapers)
JEL-codes: C32 F31 F41 (search for similar items in EconPapers)
Pages: 1 pages
Date: 2015
New Economics Papers: this item is included in nep-cba, nep-mon and nep-opm
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