Misaligned? Overvalued?. The Untold Story of the Turkish Lira

Deniz Atasoy and Sweta Saxena

Emerging Markets Finance and Trade, 2006, vol. 42, issue 3, 29-45

Abstract: Scholars agree that overvalued exchange rates result in currency crises. This paper estimates the equilibrium real exchange rate for Turkey, finding that the lira was indeed overvalued before the crises in 1994 and 2001. However, the actual real exchange rate is at present close to the equilibrium level, exposing the myth propagated by Turkish exporters that the lira's overvaluation is responsible for Turkey's uncompetitive exports. The paper also highlights the role for fiscal adjustment in macroeconomic stability.

Keywords: equilibrium real exchange rate; misalignment; overvaluation; Turkish lira (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (9)

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