Dedollarization in Turkey after decades of dollarization: A myth or reality?

Kıvılcım Metin-Özcan and Vuslat Us ()
Authors registered in the RePEc Author Service: Kivilcim Metin Özcan

Physica A: Statistical Mechanics and its Applications, 2007, vol. 385, issue 1, 292-306

Abstract: The paper analyzes dollarization in the Turkish economy given the evidence on dedollarization signals. On conducting a Vector Autoregression (VAR) model, the empirical evidence suggests that dollarization has mostly been shaped by macroeconomic imbalances as measured by exchange rate depreciation volatility, inflation volatility and expectations. Furthermore, the generalized impulse response function (IRF) analysis, in addition to the analysis of variance decomposition (VDC) gives support to the notion that dollarization seems to sustain its persistent nature, thus hysteresis still prevails. Hence, unfavorable macroeconomic conditions apparently contribute to dollarization while dollarization itself contains inertia. Furthermore, dedollarization that presumably started after 2001 has lost headway after May 2006. Thus, it seems too early to conclude that dollarization changed its route to dedollarization.

Keywords: Dollarization; VAR; Impulse response; Variance decomposition; Hysteresis; Dedollarization (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:385:y:2007:i:1:p:292-306

DOI: 10.1016/j.physa.2007.06.018

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