Effect of the central bank of Turkey's exchange rate intervention on expectation

Abstract

The aim of this paper, under the inflation targeting regime, the effect of central bank intervention both directly and indirectly on expected exchange rate of economic agents whether based on economic ground or not is to determine. In this study, expected exchange rate has been defined as function of International Fisher's theory of the difference in the national and international interest rate and Balassa-Samuelson's theory of output gaps. Making empirical analysis that the hypothesis has been investigated for the period from 2003 to 2010, using Turkish monthly data and the intervention methods applied by the CRBT which has not affected on expected exchange rate of economic agents has been concluded. © EuroJournals, Inc. 2011.