Research Article
BibTex RIS Cite

TESTING THE VALIDITY OF EXCHANGE RATE DETERMINATION APPROACHES FOR TURKEY

Year 2016, Volume: 38 Issue: 2, 111 - 128, 25.12.2016
https://doi.org/10.14780/muiibd.281331

Abstract

This paper investigates the two of the exchange rate determination approaches for Turkey. Efficient

Market Hypothesis (EMH) in weak form is tested by using overnight, weekly, monthly, quarterly and

yearly forward exchange rates and spot exchange rates for Turkish Lira/US Dollar and Turkish Lira/

Euro. Weekly data is used to test EMH for 2002:11-2015:06 period. Other approach empirically tested

in this paper is Purchasing Power Parity (PPP) Hypothesis for Turkey. Whether or not this approach

is valid is determined with monthly data covering the 2002:11-2015:03 period. In this study, LP and

LM unit root tests with two structural breaks is applied as method in addition to KPSS and Augmented

Dickey-Fuller unit root tests. Our findings don’t support the evidence that PPP hypothesis is valid but

support that market efficiency in weak form is valid.

References

  • AKDİ, Yılmaz ve diğerleri, “Testing the PPP Hypothesis for G-7 Countries”, Applied Economics Letters, 16(1), 2009, s.99–101.
  • AL-KHAZALI, Osamah M. ve diğerleri, “Are Exchange Rate Movements Predictable in Asia-Pacific Markets? Evidence of Random Walk and Martingale Difference Processes”, International Review of Economics and Finance, 21,2012, s.221-231.
  • BASHIR, Rizwana ve diğerleri, “The Efficiency of Foreign Exchange Markets in Pakistan: An Empirical Analysis”, The Lahore Journal of Economics, 19(1), 2014, s.133-149.
  • BERKE, Burcu ve diğerleri, “Döviz Piyasasının Etkinliği: Türkiye için Bir Analiz”, Ege Akademik Bakış, 14(4), 2014, s.621-636.
  • CEYLAN, R., Hakan, U., “Satın Alma Gücü Paritesi Hipotezi (SAGP)’nin OECD Ülkeleri için Test Edilmesi”, Sosyo-Ekonomi, 2, 2014, s.193-210.
  • CHEUNG, Adrian W.K. ve diğerleri, “Are Euro Exchange Rates Markets Efficient? New Evidence from a Large Panel”, Griffith Discussion Papers, 2011(09), 2011, s.1-13.
  • CUESTAS, Juan C., Regis, Paulo J., “Testing For PPP ın Australia: Evidence From Unit Root Test Against Nonlinear Trend Stationarity Alternatives”, Economics Bulletin, 3, 2008, s. 1-8.
  • CUESTAS, Juan C., “Purchasing Power Parity in Central and Eastern European Countries: an Analysis of Unit Roots and Nonlinearities”, Applied Economics Letters, 16(1), 2009, s.87-94.
  • ÇİÇEK, Macide, “A Cointegration Test for Turkish Foreign Exchange Market Efficiency”, Asian Economic and Financial Review, 4(4), 2014, s.451-471.
  • DEO, R.S., “Spectral Tests of the Martingale Hypothesis under Conditional Heteroskedasticity,” Journal of Econometrics, 99, 2000, s.291-315.
  • DOĞANLAR, Murat ve diğerleri, “Testing Long-run Validity of Purchasing Power Parity for Selected Emerging Market Economies”, Applied Economics Letters, 16(14), 2009, s.1443-1448.
  • EDISON, Hall J., “Purchasing Power Parity in the Long Run”, Journal of Money, Credit,and Banking,19(3), 1987, s. 376- 387.
  • ERLAT, Haluk, “The Nature of Persistence in Turkish Real Exchange Rates”, Emerging Markets, Finance and Trade, 39, 2003, s.70–97.
  • ESCANCIANO, Juan C., Lobato, Ignacio N., “Testing the Martingale Hypothesis”, Palgrave Handbook of Econometrics, K. Patterson and T.C. Mills eds, Palgrave, MacMillan, 2009, s.972-1003.
  • FAMA, Eugene F., “Random Walks in Stock Market Prices”, Journal of Business, 38, 1965, s. 34-105
  • FAMA, Eugene F. ve diğerleri, “The Adjustment of Stock Prices to New Information”, International Economic Review, 10(1), 1969, s.1-21.
  • FAMA, Eugene F., “Efficent Capital Markets: A Review of Theory Empirical Work”, The Journal of Finance, 25(2), 1970, s.383-417.
  • FAMA, Eugene F., “Efficient Capital Markets: II”, The Journal of Finance, 46 (5), 1991, s.1575-1617.
  • FAMA, Eugene F., “Market Efficiency, Long-term Returns and Behavioral Finance”, Journal of Financial Economics, 49 (3), 1998, s.283-306.
  • GÖZGÖR, Giray, ‘’Purchasing Power Parity Hypothesis Among the Main Trading Partners of Turkey’’, Economics Bulletin,. 31(2), 2011, s. 1432-1438.
  • GROSSMAN, Sanford J., Stiglitz, Joseph E., “On the Impossibility of Informationally Efficient Markets”, The American Economic Review, 70(3), 1980, s.393-408.
  • GÜLOĞLU, Bülent ve diğerleri, “Testing The Validity Of Quasi PPP Hypothesis: Evidence From A Recent Panel Unit Root Test With Structural Breaks”, Applied Economics Letters, 18(18), 2011, s.1817-1822.
  • IBRAHIM, Juliana ve diğerleri, “Weak-Form Efficiency of Foreign Exchange Market in the Organisation for Economic Cooperation and Development Countries: Unit Root Test”, International Journal of Business and Management, 6(6), 2011, s.55-65.
  • JENSEN, Michael C., “Some Anomalous Evidence Regarding Market Efficiency”, Journal of Financial Economics, 6(2-3), 1978, 95–101.
  • KALYONCU, Hüseyin, “New Evidence of the Validity of Purchasing Power Parity from Turkey” Applied Economics Letters, 16, 2008, s.63-67.
  • KUM, Hakan, “The Impact of Structural Break(s) on the Validity of Purchasing Power Parity in Turkey: Evidence from Zivot-Andrews and Lagrange Multiplier Unit Root Tests”, International Journal of Economics and Financial Issues, 2(3), 2012, s.241-245
  • LAO, Chi K. M., “A More Powerful Panel Unit Root Test With An Application To PPP”, Applied Economics Letters, 2009, 16(1), s.75–80.
  • LEE, Junsoo, Strazizich, Mark C., “Minimum LM Unit Root Test with Two Structural Breaks”, Review of Economics and Statistics, 85(4), 2003, s.1082-1089.
  • LEE, Junsoo, Strazizich, Mark C., “Minimum LM Unit Root Test With One Structural Break”, Working Paper, Department of Economics, Appalachain State University, 2004, s. 1-15.
  • LUMSDAINE, Robin L., PAPELL, David H., “Multiple Trend Breaks and the Unit Root Hypothesis”, Review of Economics and Statistics, 79(2), 1997, s. 212-18.
  • MABAKENG, Mukela E. P., Shefeni Johannes P. S., “Examining the Weak Form Efficiency in Foreign Exchange Market in Namibia”, International Review of Research in Emerging Markets and the Global Economy, 2014, 1(4) s.174-187
  • NANKERVIS, John C., Savin, Nathan E., “Testing for Serial Correlation: Generalized Andrews-Ploberger Tests,” Journal of Economic and Business Statistics, 28, 2010, s.246-255.
  • PERRON, Pierre, “The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis”, Econometrica, 57(10), 1989, s.1361-1401.
  • TATOĞLU, Ferda Y., “Reel Efektif Döviz Kurunun Durağanlığının Yapısal Kırılmalı Panel Birim Kök Testleri Kullanılarak Sınanması”, Doğuş Üniversitesi Dergisi, 10 (2), 2009, s.310-323.
  • TIRAŞOĞLU Burcu Y., “Yapısal Kırılmalı Birim Kök Testleri İle Oecd Ülkelerinde Satın Alma Gücü Paritesi Geçerliliğinin Testi”, Ekonometri ve İstatistik, 20, 2014, s.68-87.
  • WICKREMASINGHE, Guneratne B., “Efficiency of Foreign Exchange Markets: A Developing Country Perspective”, ABERU Discussion Paper 3, 2004, s.1-15.
  • YILDIRIM, Selim, Yıldırım, Zekeriya, “Reel Efektif Döviz Kuru Üzerinde Kırılmalı Birim Kök Testi İle Türkiye İçin Satın Alma Gücü Paritesi Hipotezinin Geçerliliğinin Sınanması”, Marmara Üniversitesi İİBF Dergisi, 33(2), 2012, s.221-238.
  • YILDIRIM, Kemal ve diğerleri, “Satın Alma Gücü Paritesinin Geçerliliğinin Test Edilmesi: Zaman Serisi ve Panel Veri Analizi”, Eskişehir Osmangazi Üniversitesi İİBF Dergisi, 8(3), 2013, s.75-95.
  • ZIVOT, Eric, Andrews, Donald W.K., “Further Evidence on the Great Crash, the Oil Price Shock and the Unit Root Hypothesis”, Journal of Business and Economic Statistics, 10,1992, s.251-270.
Year 2016, Volume: 38 Issue: 2, 111 - 128, 25.12.2016
https://doi.org/10.14780/muiibd.281331

Abstract

References

  • AKDİ, Yılmaz ve diğerleri, “Testing the PPP Hypothesis for G-7 Countries”, Applied Economics Letters, 16(1), 2009, s.99–101.
  • AL-KHAZALI, Osamah M. ve diğerleri, “Are Exchange Rate Movements Predictable in Asia-Pacific Markets? Evidence of Random Walk and Martingale Difference Processes”, International Review of Economics and Finance, 21,2012, s.221-231.
  • BASHIR, Rizwana ve diğerleri, “The Efficiency of Foreign Exchange Markets in Pakistan: An Empirical Analysis”, The Lahore Journal of Economics, 19(1), 2014, s.133-149.
  • BERKE, Burcu ve diğerleri, “Döviz Piyasasının Etkinliği: Türkiye için Bir Analiz”, Ege Akademik Bakış, 14(4), 2014, s.621-636.
  • CEYLAN, R., Hakan, U., “Satın Alma Gücü Paritesi Hipotezi (SAGP)’nin OECD Ülkeleri için Test Edilmesi”, Sosyo-Ekonomi, 2, 2014, s.193-210.
  • CHEUNG, Adrian W.K. ve diğerleri, “Are Euro Exchange Rates Markets Efficient? New Evidence from a Large Panel”, Griffith Discussion Papers, 2011(09), 2011, s.1-13.
  • CUESTAS, Juan C., Regis, Paulo J., “Testing For PPP ın Australia: Evidence From Unit Root Test Against Nonlinear Trend Stationarity Alternatives”, Economics Bulletin, 3, 2008, s. 1-8.
  • CUESTAS, Juan C., “Purchasing Power Parity in Central and Eastern European Countries: an Analysis of Unit Roots and Nonlinearities”, Applied Economics Letters, 16(1), 2009, s.87-94.
  • ÇİÇEK, Macide, “A Cointegration Test for Turkish Foreign Exchange Market Efficiency”, Asian Economic and Financial Review, 4(4), 2014, s.451-471.
  • DEO, R.S., “Spectral Tests of the Martingale Hypothesis under Conditional Heteroskedasticity,” Journal of Econometrics, 99, 2000, s.291-315.
  • DOĞANLAR, Murat ve diğerleri, “Testing Long-run Validity of Purchasing Power Parity for Selected Emerging Market Economies”, Applied Economics Letters, 16(14), 2009, s.1443-1448.
  • EDISON, Hall J., “Purchasing Power Parity in the Long Run”, Journal of Money, Credit,and Banking,19(3), 1987, s. 376- 387.
  • ERLAT, Haluk, “The Nature of Persistence in Turkish Real Exchange Rates”, Emerging Markets, Finance and Trade, 39, 2003, s.70–97.
  • ESCANCIANO, Juan C., Lobato, Ignacio N., “Testing the Martingale Hypothesis”, Palgrave Handbook of Econometrics, K. Patterson and T.C. Mills eds, Palgrave, MacMillan, 2009, s.972-1003.
  • FAMA, Eugene F., “Random Walks in Stock Market Prices”, Journal of Business, 38, 1965, s. 34-105
  • FAMA, Eugene F. ve diğerleri, “The Adjustment of Stock Prices to New Information”, International Economic Review, 10(1), 1969, s.1-21.
  • FAMA, Eugene F., “Efficent Capital Markets: A Review of Theory Empirical Work”, The Journal of Finance, 25(2), 1970, s.383-417.
  • FAMA, Eugene F., “Efficient Capital Markets: II”, The Journal of Finance, 46 (5), 1991, s.1575-1617.
  • FAMA, Eugene F., “Market Efficiency, Long-term Returns and Behavioral Finance”, Journal of Financial Economics, 49 (3), 1998, s.283-306.
  • GÖZGÖR, Giray, ‘’Purchasing Power Parity Hypothesis Among the Main Trading Partners of Turkey’’, Economics Bulletin,. 31(2), 2011, s. 1432-1438.
  • GROSSMAN, Sanford J., Stiglitz, Joseph E., “On the Impossibility of Informationally Efficient Markets”, The American Economic Review, 70(3), 1980, s.393-408.
  • GÜLOĞLU, Bülent ve diğerleri, “Testing The Validity Of Quasi PPP Hypothesis: Evidence From A Recent Panel Unit Root Test With Structural Breaks”, Applied Economics Letters, 18(18), 2011, s.1817-1822.
  • IBRAHIM, Juliana ve diğerleri, “Weak-Form Efficiency of Foreign Exchange Market in the Organisation for Economic Cooperation and Development Countries: Unit Root Test”, International Journal of Business and Management, 6(6), 2011, s.55-65.
  • JENSEN, Michael C., “Some Anomalous Evidence Regarding Market Efficiency”, Journal of Financial Economics, 6(2-3), 1978, 95–101.
  • KALYONCU, Hüseyin, “New Evidence of the Validity of Purchasing Power Parity from Turkey” Applied Economics Letters, 16, 2008, s.63-67.
  • KUM, Hakan, “The Impact of Structural Break(s) on the Validity of Purchasing Power Parity in Turkey: Evidence from Zivot-Andrews and Lagrange Multiplier Unit Root Tests”, International Journal of Economics and Financial Issues, 2(3), 2012, s.241-245
  • LAO, Chi K. M., “A More Powerful Panel Unit Root Test With An Application To PPP”, Applied Economics Letters, 2009, 16(1), s.75–80.
  • LEE, Junsoo, Strazizich, Mark C., “Minimum LM Unit Root Test with Two Structural Breaks”, Review of Economics and Statistics, 85(4), 2003, s.1082-1089.
  • LEE, Junsoo, Strazizich, Mark C., “Minimum LM Unit Root Test With One Structural Break”, Working Paper, Department of Economics, Appalachain State University, 2004, s. 1-15.
  • LUMSDAINE, Robin L., PAPELL, David H., “Multiple Trend Breaks and the Unit Root Hypothesis”, Review of Economics and Statistics, 79(2), 1997, s. 212-18.
  • MABAKENG, Mukela E. P., Shefeni Johannes P. S., “Examining the Weak Form Efficiency in Foreign Exchange Market in Namibia”, International Review of Research in Emerging Markets and the Global Economy, 2014, 1(4) s.174-187
  • NANKERVIS, John C., Savin, Nathan E., “Testing for Serial Correlation: Generalized Andrews-Ploberger Tests,” Journal of Economic and Business Statistics, 28, 2010, s.246-255.
  • PERRON, Pierre, “The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis”, Econometrica, 57(10), 1989, s.1361-1401.
  • TATOĞLU, Ferda Y., “Reel Efektif Döviz Kurunun Durağanlığının Yapısal Kırılmalı Panel Birim Kök Testleri Kullanılarak Sınanması”, Doğuş Üniversitesi Dergisi, 10 (2), 2009, s.310-323.
  • TIRAŞOĞLU Burcu Y., “Yapısal Kırılmalı Birim Kök Testleri İle Oecd Ülkelerinde Satın Alma Gücü Paritesi Geçerliliğinin Testi”, Ekonometri ve İstatistik, 20, 2014, s.68-87.
  • WICKREMASINGHE, Guneratne B., “Efficiency of Foreign Exchange Markets: A Developing Country Perspective”, ABERU Discussion Paper 3, 2004, s.1-15.
  • YILDIRIM, Selim, Yıldırım, Zekeriya, “Reel Efektif Döviz Kuru Üzerinde Kırılmalı Birim Kök Testi İle Türkiye İçin Satın Alma Gücü Paritesi Hipotezinin Geçerliliğinin Sınanması”, Marmara Üniversitesi İİBF Dergisi, 33(2), 2012, s.221-238.
  • YILDIRIM, Kemal ve diğerleri, “Satın Alma Gücü Paritesinin Geçerliliğinin Test Edilmesi: Zaman Serisi ve Panel Veri Analizi”, Eskişehir Osmangazi Üniversitesi İİBF Dergisi, 8(3), 2013, s.75-95.
  • ZIVOT, Eric, Andrews, Donald W.K., “Further Evidence on the Great Crash, the Oil Price Shock and the Unit Root Hypothesis”, Journal of Business and Economic Statistics, 10,1992, s.251-270.
There are 39 citations in total.

Details

Subjects Economics
Journal Section Makaleler
Authors

Mehmet Çağrı Gözen

Selçuk Koç

Tezcan Abasız

Publication Date December 25, 2016
Submission Date December 25, 2016
Published in Issue Year 2016 Volume: 38 Issue: 2

Cite

APA Gözen, M. Ç., Koç, S., & Abasız, T. (2016). TESTING THE VALIDITY OF EXCHANGE RATE DETERMINATION APPROACHES FOR TURKEY. Marmara Üniversitesi İktisadi Ve İdari Bilimler Dergisi, 38(2), 111-128. https://doi.org/10.14780/muiibd.281331
AMA Gözen MÇ, Koç S, Abasız T. TESTING THE VALIDITY OF EXCHANGE RATE DETERMINATION APPROACHES FOR TURKEY. Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi. December 2016;38(2):111-128. doi:10.14780/muiibd.281331
Chicago Gözen, Mehmet Çağrı, Selçuk Koç, and Tezcan Abasız. “TESTING THE VALIDITY OF EXCHANGE RATE DETERMINATION APPROACHES FOR TURKEY”. Marmara Üniversitesi İktisadi Ve İdari Bilimler Dergisi 38, no. 2 (December 2016): 111-28. https://doi.org/10.14780/muiibd.281331.
EndNote Gözen MÇ, Koç S, Abasız T (December 1, 2016) TESTING THE VALIDITY OF EXCHANGE RATE DETERMINATION APPROACHES FOR TURKEY. Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi 38 2 111–128.
IEEE M. Ç. Gözen, S. Koç, and T. Abasız, “TESTING THE VALIDITY OF EXCHANGE RATE DETERMINATION APPROACHES FOR TURKEY”, Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi, vol. 38, no. 2, pp. 111–128, 2016, doi: 10.14780/muiibd.281331.
ISNAD Gözen, Mehmet Çağrı et al. “TESTING THE VALIDITY OF EXCHANGE RATE DETERMINATION APPROACHES FOR TURKEY”. Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi 38/2 (December 2016), 111-128. https://doi.org/10.14780/muiibd.281331.
JAMA Gözen MÇ, Koç S, Abasız T. TESTING THE VALIDITY OF EXCHANGE RATE DETERMINATION APPROACHES FOR TURKEY. Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi. 2016;38:111–128.
MLA Gözen, Mehmet Çağrı et al. “TESTING THE VALIDITY OF EXCHANGE RATE DETERMINATION APPROACHES FOR TURKEY”. Marmara Üniversitesi İktisadi Ve İdari Bilimler Dergisi, vol. 38, no. 2, 2016, pp. 111-28, doi:10.14780/muiibd.281331.
Vancouver Gözen MÇ, Koç S, Abasız T. TESTING THE VALIDITY OF EXCHANGE RATE DETERMINATION APPROACHES FOR TURKEY. Marmara Üniversitesi İktisadi ve İdari Bilimler Dergisi. 2016;38(2):111-28.

Marmara University Journal of Economic and Administrative Sciences is licensed under Attribution-NonCommercial 4.0 International

by-nc.png