Impact of asymmetry on exchange rate determination: The role of fundamentals

Levent Korap

Emerging Markets Review, 2024, vol. 63, issue C

Abstract: This study tries to take a new look at the exchange rate determination model by employing recent developments in time series estimation methodologies. For this purpose, the validity of the sticky price monetary exchange rate model has been searched for the Turkish lira / US dollar case. Estimation results considering both linear and non–linear modeling approaches highly support the theoretical foundations and reveal explicitly the asymmetric nature of the model. The paper infers that since the nominal exchange rate seems to be determined through the economic fundamentals, it should not be used as a policy tool with a long–term perspective.

Keywords: Exchange rate determination; Sticky price monetary model; Cointegration; Asymmetry; Dynamic multiplier effects; Turkish economy (search for similar items in EconPapers)
JEL-codes: F31 F41 F47 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:63:y:2024:i:c:s1566014124001018

DOI: 10.1016/j.ememar.2024.101206

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