Impact of Reserve Option Mechanism on Exchange Rate Volatility During the FED's Tapering Period

Erkan Demirbas () and Nurettin Can ()
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Erkan Demirbas: Department of Accountancy, Finance, and Economics, University of Lincoln, UK
Nurettin Can: Department of Economics, Vistula University, Warsaw, Poland and Nile University of Nigeria

Journal of Central Banking Theory and Practice, 2022, vol. 11, issue 3, 155-178

Abstract: This study investigates the effectiveness of ROM. We conducted the GARCH (1,1) Model to determine whether ROM contributed to decreasing the volatility of USD/TL exchange rate for the period 2013- 2014. We construct four Models where four different variables are separately used that represent the ROM tool, i.e. the amount of FX reserves of CBRT via ROM, and the share of the FX reserves via ROM in Gross FX Reserves of CBRT. Our findings are convincing to say FX facility and the ratio of utilization for the FX facility to ensure the results are statistically meaningful during this period.

Keywords: Reserve Options Mechanism; Exchange Rate Volatility; Turkish Lira; Tapering; GARCH. (search for similar items in EconPapers)
JEL-codes: E40 E43 E58 F31 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:cbk:journl:v:11:y:2022:i:3:p:155-178

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