Mitigating Turkey’s Trilemma Tradeoffs

Yasin Akcelik, Orcan Çörtük and Ibrahim Turhan

Emerging Markets Finance and Trade, 2014, vol. 50, issue 6, 102-118

Abstract: We study the trilemma configuration of the Turkish economy for the period 2002–11. This includes calculating the trilemma indices and regressing them on a constant following Aizenman et al. (2008). Yet we extend this approach by applying a Kalman filter to the classical linear regression to capture the time-varying importance of policy decisions. Next, we reveal the role of central bank foreign reserves and required reserves in mitigating trilemma tradeoffs through their relation with trilemma residuals in a vector autoregression (VAR) framework—we show that the foreign reserves to GDP ratio and the required reserve ratio have a positive significant impact on the residuals, thus making the policy tradeoffs smaller.

Date: 2014
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Working Paper: Mitigating Turkey's trilemma trade-offs (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:50:y:2014:i:6:p:102-118

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DOI: 10.1080/1540496X.2014.1013862

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