Skip to main content

Measuring exchange rate misalignment in Turkey

Buy Article:

$55.00 plus tax (Refund Policy)


Turkey has embarked an extensive dis-inflation and stabilization program in December 1999. The programme exclusively relied on a nominally pegged (anchored) exchange rate system for dis-inflation and on fiscal austerity. In February 2001, however, Turkey experienced a severe financial crisis which necessiated the dismantling of the exchange rate anchor and a switch to a regime of free float.

This article proposes a new methodology to measure exchange rate misalignment for Turkey over the period January 1992 to December 2001. In a single equation framework, the model estimates the real exchange rate within a time varying parameter model, where a return-to-normality assumption about the parameters is assumed. Contrary to common belief, it is found that, except the initial four months of the stabilization programme, the Turkish lira remained undervalued for most of 2000. Also, one observes a pattern where the lira has been overvalued after the financial crisis of 1994 until 1998, and has displayed a tendency of undervaluation after then.

Document Type: Research Article


Publication date: 2004-09-01

More about this publication?
  • Access Key
  • Free content
  • Partial Free content
  • New content
  • Open access content
  • Partial Open access content
  • Subscribed content
  • Partial Subscribed content
  • Free trial content
Cookie Policy
Cookie Policy
Ingenta Connect website makes use of cookies so as to keep track of data that you have filled in. I am Happy with this Find out more