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Reserve Options Mechanism and Exchange Rate Volatility: An Implementation for Turkey

Year 2020, Volume: 1 Issue: 1, 60 - 72, 31.12.2020

Abstract

Due to the flexible monetary policies implemented during the crisis, low-interest rates obtained funds has moved towards countries with emerging economies and that caused speculative attacks (the volatility in exchange rates, capital market etc. to make short-term trades.) on countries such as Turkey. Therefore, Turkey has developed a set of measures to ensure price stability along with financial stability. One of these measures is the Reserve Option Mechanism, which enables TL required reserves to be held in foreign currency. Foreign currencies entering the country through the Reserve Options Mechanism will not enter the economy directly, and some of this money will be kept by the CBRT as required reserves by banks. Thanks to this mechanism, it is aimed to reduce the volatility in exchange rates. In this study, the effect of Reserve Options Mechanism on exchange rate volatility has been examined. In this framework, the effect of the GARCH approach used in modelling volatility in the 2011-2016 period and the Reserve Option Mechanism on exchange rate volatility was researched. As a result of the study, it is concluded that the Reserve Option Mechanism (ROM) variable decreases the volatility.

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There are 25 citations in total.

Details

Primary Language English
Subjects Operation
Journal Section Research Articles
Authors

Lokman Kantar This is me 0000-0002-5982-6021

Publication Date December 31, 2020
Published in Issue Year 2020 Volume: 1 Issue: 1

Cite

APA Kantar, L. (2020). Reserve Options Mechanism and Exchange Rate Volatility: An Implementation for Turkey. Journal of Sustainable Economics and Management Studies, 1(1), 60-72.

Journal of Sustainable Economics and Management Studies (ECOMAN)
2718-1065 (Printed ISSN) & 2791-8084 (Electronic ISSN)
ecoman@gelisim.edu.tr