Natalya Ketenci

Exchange rate determination: monetary approach in the new EU members and Turkey

This study is based on the evaluation of the long-run performance of the monetary model approach of exchange rate determination for the newly entered EU members and Turkey. First, we tested the cointegration relationship between exchange rates and monetary variables. Then, the forecast estimates of the monetary approach were used for comparing the performances with the random walk model.

Trade in services: The elasticity approach for the case of Turkey

This study includes the analysis of global trade in the services and service sector in Turkey, and estimates the elasticity of trade in services to real exchange rates and income. There is an increasing role of the service sector in the Turkish economy; however, a decreasing trend of trade in services is taking place. The commitments of the General Agreement on Trade in Services (GATS) were found to be ineffective, at least in the case of Turkey. The empirical findings suggest that the real exchange rate is not a significant determinant for the trade in services. We found an inelastic real exchange rate and income elasticities in trade demand functions. However, the value of income elasticity significantly exceeds the value of real exchange rate elasticity.

The Feldstein–Horioka Puzzle and Structural Breaks: Evidence from the Largest Countries of Asia:

The purpose of this article is to investigate the level of capital mobility in the largest economies of Asia by testing the Feldstein–Horioka puzzle. Panel estimations using quarterly data for the period from 1995 to 2011 have been made for the seven largest economies of Asia, specifically Russia, Japan, South Korea, Turkey, India, Indonesia and China. This group of countries has gained significant economic power in the world over the last decade. Specifically, the growth rates of the sample has for a long period of time exceeded the growth rates of most developed countries. The total GDP adjusted for PPP is far above of the GDP of the European Union and NAFTA groups and very close to the G7 group. The article examines changes in investment savings relationships when the presence of structural shifts—where such exist—is taken into account. Recently developed panel techniques are employed to examine the investment–savings relationship and estimate saving–retention coefficients. As a result of these estimations, countries were divided into two groups consisting of stable and unstable economies. This division of countries allows for more precise estimates of capital mobility. The empirical findings reveal the existence of the moderate level of capital mobility in the group. Results indicate that countries with relatively higher capital mobility are exposed to the negative effects of international market fluctuations. JEL Classification: F32

Trade Elasticities, Commodity Prices, and the Global Financial Crisis

The effect of the global financial crisis on the international trade patterns of developed countries has been one of the main focuses of recent scholarship. However, world trade depends evermore on emerging markets increases every day. Therefore, it is important to study the level of the negative effect of the crisis on emerging economies and the level of their recovery potential. This paper empirically studies the effects of the financial crisis on trade elasticities of BRIICS (Brazil, Russia, India, Indonesia, China, and South Africa) countries and Turkey. The imperfect substitute model (Goldstein & Khan, 1985) for the export and import demand functions is used. Additionally, the extended model is estimated where commodity price index is employed. The autoregressive distributed lag (ARDL) approach to cointegration is applied to test the cointegration relationships between exports and imports and their determinants, and in order to estimate the export and import elasticities in the countries under examination. The empirical results provide enough evidence to conclude that changes in the exchange rate and in commodity prices did not play significant role in export and import demand functions before and after the global financial crisis. However, foreign and domestic incomes are found highly significant and elastic in export and import demand functions, respectively. It is found as well that the global financial crisis had increasing effect on export and import responsiveness to foreign and domestic incomes respectively, except for Turkey and Brazil in the export demand function and South Africa in the import demand function.

Current account and relative prices: Are there any cointegration relationships in the presence of structural breaks in emerging economies?

The aim of this study is to examine the long-run relationship between the current account and relative prices, such as terms of trade (TOT) and real exchange rate, for the emerging economies. These variables have been exposed to large fluctuations for more than two decades in all emerging economies; therefore, structural breaks have to be taken into account in all estimations. In this article, various methodological techniques have been used to examine this long-run relationship (with and without the structural breaks). Two important results have emerged, first; when the structural changes are excluded there is a strong evidence for long-run relationship between current account and relative prices. Second; when the structural breaks are included, variables are found to be stationary. Hence, depending on the stability of the variables, the validity of the cointegration relationship has been seriously questioned. This study illustrates that the test results proving non-stationary of the series and the presence of cointegration may be spurious if there is any possibility of instability.