Determinants of Exchange Rate Jumps in Türkiye

Abstract

This study examines the exchange rate jumps in Türkiye between 2013 and 2021 and the factors influencing these jumps. The Turkish Lira experienced a consistent depreciation against other currencies during this period. A closer examination of the depreciation timeline revealed that the Turkish Lira's depreciation was occasionally abrupt and exceedingly pronounced. The primary objective of this research is to identify these episodes of spikes, which can be characterized as jumps in exchange rates amid regular increases. To achieve this, the Pruned Exact Linear Time (PELT) algorithm was employed to detect sudden shifts in the exchange rate. Taking these points as dependent variables, a rare event logistic regression model was utilized to determine the probability of an exchange rate jump. The findings indicate that increased dollarization raises the likelihood of an exchange rate jump, while higher deposit rates and central bank reserves reduce the probability of a jump.

Keywords

• Exchange Rate
• Dollarization
• PELT Algorithm
• Logistic Regression
• Jump Point

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