The demand for money in Turkey and currency substitution

Mohsen Bahmani-Oskooee and Muge Karacal

Applied Economics Letters, 2006, vol. 13, issue 10, 635-642

Abstract: Over the last three decades, the Turkish economy has experienced severe macro-shocks, among which depreciation of the Turkish lira is the most noticeable one. The Turkish lira (TL) has depreciated from 13 TL per US dollar in 1973 to more than 1.5 million TL per dollar today. It is expected that because of these shocks, some of the macro-relationships could suffer from structural instability which makes policy formulation and predictions difficult. This paper considers the demand for money in Turkey. To take account of currency substitution, the demand for money that includes the exchange rate in addition to income, interest rate and inflation rate is estimated. After incorporating the CUSUM and CUSUMSQ tests in bounds testing approach for cointegration, it is shown that in Turkey for a successful and effective monetary policy, the monetary authorities would rather concentrate on M1 because not only is it cointegrated with its determinants and it is stable, all four determinants belong to the cointegrating space.

Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://www.informaworld.com/openurl?genre=article& ... 40C6AD35DC6213A474B5 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:13:y:2006:i:10:p:635-642

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/13504850500358819

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().