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Exchange Rate Pass-Through in Turkey: Has it Changed and to What Extent?

Hakan Kara, Hande Kucuk (), Umit Ozlale, Burc Tuger, Devrim Yavuz and Mustafa Yücel

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: This study analyses the impact of exchange rates on domestic prices in Turkey. We seek to demonstrate the variations (if any) in the exchange rate pass-through across different exchange rate regimes, identify the determinants of this change, and characterize the degree and extent of pass-through across different sub-sectors. Our empirical results reveal that the pass-through of exchange rates to domestic prices has declined in the post-2001 period in comparison with the earlier episodes �thanks to a decline in the �indexation� behavior. These findings suggest that switching to floating exchange rate regime and implementing an ambitious disinflation policy have contributed, to a large extent, to the reduction in the pass-through. Nevertheless, the impact of exchange rate on inflation, especially in the traded good is still notable, pointing out that the effect of nominal exchange rate movement on relative prices have increased in the float period.

Keywords: Exchange rate pass-through; Time-varying parameters; Seemingly unrelated regressions; Disinflation; Floating exchange rate regime (search for similar items in EconPapers)
JEL-codes: C51 E31 E58 (search for similar items in EconPapers)
Date: 2005
New Economics Papers: this item is included in nep-cwa and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

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