 The Monetary Model of the Exchange Rate under High Inflation -The case of the Turkish Lira/US DollarCzech Journal of Economics and Finance (Finance a uver), 2003, vol. 53, issue 3-4, 113-129 Abstract: This paper applies the Johansen cointegration technique to examine the validity of the monetary model of exchange-rate determination as an explanation of the Turkish lira/United States dollar relationship over the 1987:1?2000:12 period. A single cointegrating vector is identified whose coefficients conform in broad terms to the restrictions implied by the monetary model, thus lending support to the interpretation of the model as describing a long-run equilibrium relationship. This support is reinforced by the results derived from the adjustment coefficient, which identify a clear short-run tendency of the exchange rate to revert to the equilibrium value defined by the estimated long-run model. After finding support for the long-run monetary model, we calculate misalignment from the estimated long-run relationship to evaluate whether the lira was overvalued before the eve of the 2001 financial crisis in Turkey. Calculated misalignment shows a substantial overvaluation of the lira before the crisis. Keywords: exchange rates; monetary model; misalignment; Turkey (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:53:y:2003:i:3-4:p:113-129 Access Statistics for this article More articles in Czech Journal of Economics and Finance (Finance a uver) from Charles University Prague, Faculty of Social Sciences Contact information at EDIRC. |
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