Business cycles through international shocks: A structural investigation

This paper investigates the sources of output volatility by decomposing the international shocks into finance and trade shocks. Through structural Bayesian estimations of an open-economy DSGE model on 16 countries, on average, international shocks explain around 70% of output fluctuations.     

The day of the week effect on stock market volatility and volume: International evidence

This study investigates the day of the week effect on the volatility of major stock market indexes for the period of 1988 through 2002. Using a conditional variance framework, we find that the day of the week effect is present in both return and volatility equations. The highest volatility occurs on Mondays for Germany and Japan, on Fridays for Canada and the United States, and on Thursdays for the United Kingdom. For most of the markets, the days with the highest volatility also coincide with that market's lowest trading volume. Thus, this paper supports the argument made by Foster and Viswanathan [Rev. Financ. Stud. 3 (1990) 593] that high volatility would be accompanied by low trading volume because of the unwillingness of liquidity traders to trade in periods of high stock market volatility.     

Day of the week effect on foreign exchange market volatility: Evidence from Turkey

This paper assesses the day of the week effect of the daily depreciation of the Turkish lira (TL) against the US dollar (USD) and its volatility. The empirical evidence from Turkey presented here suggests that Thursdays are associated with higher and Mondays with lower depreciation rates compared to those of Wednesdays. Moreover, Mondays and Tuesdays are associated with higher volatility than Wednesdays.     

Monetary policy under a multiple-tool environment

Since the 2008 global financial crisis, central banks have been using a new set of policy tools in addition to conventional tools (such as short-term interest rates) to conduct monetary policy. This paper employs a methodology that captures 25 of these tools with a limited number of factors for Turkey. Due to a set of factors such as the high volatility of inflation, market-friendly financial architecture and its size, Turkey provides a unique environment to capture these factors and their effects on economic performance. The three factors identified here can be categorized as interest rate, central bank foreign exchange position and liquidity. The empirical evidence reveals that these three factors affect all the economic-state variables considered in the paper in different directions and magnitudes.     

Effects of USD–Euro parity on a small open economy: evidence from Turkey

This study assesses the effect of USD–Euro parity on a small open economy where exports are predominantly denominated in Euros and imports are denominated in USD. Empirical evidence from Turkey suggests that a positive change in the USD value of the Euro appreciates the local currency, decreases inflation and increases output.     

The process of technical change in UK manufacturing

This paper tests the validity of the Fisher hypothesis, which establishes a positive relation between interest rates and expected inflation, for the G7 countries and 45 developing economies. For this purpose, we estimate a version of the GARCH specification of the hypothesis for all countries included in the sample. We also test the augmented Fisher relation by including the inflation uncertainty in the equation. The simple Fisher relation holds in all G7 countries but in only 23 developing countries. There is a positive and statistically significant relationship between interest rates and inflation uncertainty for six of the G7 and 18 of the developing countries and this relationship is negative for seven developing countries.     

Household food consumption in Turkey

This paper analyses Turkish household food consumption, usingdata from the 2003 Turkish Household Expenditure Survey. A completedemand system is estimated taking into account demographic differencesand zero consumption. The highest expenditure elasticity isfound for the meat and meat products group, suggesting thatits demand will grow faster than the demand for other productsas the economy develops and income increases. Demand is moreprice-responsive for fats and oils and non-alcoholic beveragesthan all other food products. Regional and seasonal differencesand socio-demographic factors are as important as the conventionaleconomic variables in explaining observed differences in thehousehold's food consumption patterns in Turkey.     

A Generalization of the Lone Wolf Theorem

A non‐constructive generalization of the ‘lone wolf’ theorem, which states that in the roommates problem an agent is single in a stable matching if and only if that agent is single in every other stable matching, is presented. The generalization is in two directions: (i) the set of permissible roommates is arbitrary as long as all singles are allowed, and (ii) the set of preference profiles is any subset of the set of all profiles of strict preferences defined over permissible roommates.     

Sovereign default, private sector creditors, and the IFIs

The data reveal that emerging market sovereign borrowing from International Financial Institutions (IFIs) is small, intermittent and countercyclical compared to that from private sector creditors. The IFI loan contracts offered to sovereigns differ from the private ones in that they are more enforceable and have conditionality arrangements attached to them. Taking these contractual differences as given, this paper builds a quantitative model of a sovereign borrower and argues that better enforceability of IFI loan contracts is the main institutional feature that explains the size and cyclicality while conditionality accounts for the intermittency of borrowing from the IFIs.     

Can inflation targeting regimes be effective in developing countries? The Turkish experience

This paper examines the performance of Turkey's inflation targeting (IT) experience. We find the IT regime to be an effective framework. Our judgment is based on three broad conclusions supported by empirical analyses. First, fiscal stability is an effective tool for a successful monetary policy. Second, the overnight policy of the Central Bank of Turkey rate is a significant determinant of the changes in market lending rates, which is the preliminary step in the monetary transmission mechanism. Third, recent developments on the broader issue of the effectiveness of interest rate policy in controlling inflation through aggregate demand management and through other channels are encouraging. Based on our findings, we argue that the impact of policy rate changes on economic activity and inflation have become more predictable and changed in the direction in line with theory, improving the transmission capacity of monetary policy.