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POLİTİCAL EXCHANGE RATE FLUCTUATİONS SPECİFİC TO FİXED EXCHANGE RATE REGİMES: A CASE STUDY ON TURKEY

Ahmet Emrah Tayyar
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Ahmet Emrah Tayyar: ULUDAG UNIVERSITY, INSTITUTE OF SOCIAL SCIENCES, ECONOMICS DEPARTMENT

Annals - Economy Series, 2017, vol. 2, 4-14

Abstract: Based on political business cycle theories, governments manipulate the economy with macroeconomic policies to be re-elected. Thus, government’s uses of exchange rates in addition to monetary and fiscal policies create "Political Exchange Rate Fluctuations". The main objective of the present study is to determine the political exchange rate fluctuations during periods of fixed exchange rate implementation in Turkey. Since devaluations in countries that implement fixed exchange rates is an indicator of the failure of the government, devaluations are usually implemented after the elections. Eight of the nine devaluations implemented in Turkey between 1946-2001 were realized after the elections. Therefore, it is possible to discuss the existence of political exchange rate fluctuations under fixed exchange rate regimes in Turkey. Furthermore, devaluations based on the election date were discussed in the present study based on economic crises, the reforms implemented after the crises and the pursuits of individual-political gain by the central bank director.

Keywords: Political business cycle theories; political exchange rate fluctuations; fixed exchange rate; devaluation; central bank; Turkey. (search for similar items in EconPapers)
Date: 2017
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