Impact of Currency Appreciation and Currency Shock on the Real Side in a Small and Liberal Economy

Refik Erzan () and Osman Sari

No 9623, Working Papers from Economic Research Forum

Abstract: The paper examines the impact of the currency appreciation (1988-1993) and the sudden and major depreciation (early 1994) on the real side of the Turkish economy by investigating the volume and commodity composition of production, domestic demand and trade. Two patterns are captured and empirically estimated: (i) In a small economy with low barriers to trade, real currency appreciation ('overvaluation') can turn the industry inward-looking. (ii) Exports respond to a sudden depreciation of the currency with a lag (in fact first with a drop, characterized by the J-curve). The estimation of the J-curve gives the timing of the export response.

Date: 1996-08-08, Revised 1996-08-08
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Persistent link: https://EconPapers.repec.org/RePEc:erg:wpaper:9623

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