Turkey: (In)Visible Hand of the Central Bank

Tue, May 13 2008, 09:36 GMT
by Yapi Kredi Bank Economic Research Department

Yapi Kredi Bank


Short after the introduction of floating exchange rate regime following the crisis in 2001, the Central Bank of the Republic of Turkey (CBRT) intervened in the currency markets from time to time in order to ensure the stability of exchange rates. Although any kind of intervention does not fit into the nature of “pure” floating exchange rate regime, it occurs as an “inevitable option” under certain circumstances.

The main intention behind these interventions have almost always been disputed by financial markets and the usual take has been that the CBRT had some level concerns in mind all the time despite their rhetoric which focused on mitigating volatility in the FX market. It has for quite some time been a matter of credibility, and probably still is, for the CBRT as to what it executed aimed at something different than it preached, but very little has come out as verifying or contradicting analytical work.

Another YKB research (by Cevdet Akçay and Murat Can Aşlak, forthcoming) is supportive of the CBRT’s stated intentions, but different analytical approaches should be more than welcome to gain an insight into the decision making process of the CBRT. This piece is a very modest attempt at that.

Published on  Tue, May 13 2008, 09:42 GMT

Yapi Kredi  | Yapi ve Kredi Plaza D Blok, Levent 80620 Istanbul
http://www.yapikredi.com | research@ykb.com

Legal disclaimer and risk disclosure

This document is prepared by the Economic Research Department of Yapi Kredi Bank A.S by using official data. No responsibility is assumed for the accuracy of the information given in the document although utmost care has been taken in their compilation and processing.

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