Economics and Business
ISSN 2775-9237 (Online)
Published: 12 March 2018
Is Currency Depreciation or Appreciation Expansionary in Turkey?
Southeastern Louisiana University, United States of America
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Based on an extended IS-MP-AS model (Romer, 2000), this paper finds that real appreciation raised real GDP in Turkey during 2002.Q2-2011.Q2 whereas real depreciation helped increase real GDP during 2011.Q3-2017.Q1. In addition, a lower government debt-to-GDP ratio, a lower lagged world real interest rate, a lower real oil price or a lower expected inflation rate helped raise real GDP. These results suggest that the relationship between aggregate output and exchange rates may be subject to structural changes and that a prudent fiscal policy would be more appropriate.
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