سهام شناور آزاد و نوسانات تصادفی : تجربه از یک اقتصاد کوچک باز

Following a dramatic collapse of a fixed exchange rate based inflation stabilization program, Turkey moved into a free floating exchange rate system in February 2001. In this paper, an asymmetric stochastic volatility model of the foreign exchange rate in Turkey is estimated for the floating period. It is shown that there is a positive relation between the exchange return and its volatility. Particularly, an increase in the return at time t results in an increase in volatility at time t+1. However, the effect is asymmetric: a decrease in the exchange rate return at time t causes a relatively less decrease in volatility at time t+1. The results imply that a central bank with a volatility smoothing policy would be biased in viewing the shocks to the exchange rate in favor of appreciation. The bias would increase if the bank is also following an inflation targeting policy.

Following a dramatic collapse of an IMF backed, fixed exchange rate based inflation stabilization program, Turkey moved into a free floating exchange rate system in February 2001. Since then, the Central Bank of Turkey has insisted that the monetary authority would stick with the floating exchange rate regime and pursue an implicit inflation targeting policy by controlling the monetary aggregates along with an indicative interest rate. The Central Bank has asserted several times that the level or the direction of nominal exchange rates has not been a target but the volatility of the exchange rate is a real concern (CBT [1]). At the beginning of the float period, the daily change in exchange rate fluctuated wildly. The Central Bank's policies on the one hand and the developments in the supply side of the exchange rate market along with favorable external factors on the other hand resulted in a decrease in volatility and the exchange rate is relatively stabilized (see Fig. 1).1 The initial sharp real depreciation of the Turkish Lira (TRL) against major currencies was reversed later and the real appreciation reached to record levels, especially during the first three quarters of 2003. According to the real effective exchange rate index of the Central Bank, the overall real appreciation between February 2001 and September 2003 is 44%. Full-size image (55 K) Fig. 1. TRL/USD daily exchange rate during the floating exchange rate regime in Turkey. (a) The level (in million TRL). (b) Continuously compounded daily return of TRL/USD (percent) (c) Histogram of daily returns. (d) Histogram of daily returns excluding 1% of extremes from both tails. Sample period: March 12, 2001–October 30, 2003, covering 667 business days. Data source: the Central Bank of Turkey. Figure options Substantial appreciation of TRL can be explained to a certain extent by a sharp increase in labor productivity and a fall in real wages during the same period. The labor productivity in the private manufacturing industry went up 12% between the last quarter of 2000 and the second quarter of 2003, accompanied by a fall in nominal wages in USD terms. As a result, the unit wage index in the private manufacturing industry (in USD) decreased 21% which partially justifies the real appreciation. However, although there was an upward correction in nominal exchange rates in October 2003, the currency is still over appreciated by any means of comparison and the dynamics behind the record level of real appreciation should be investigated. In this paper, an asymmetric stochastic volatility model of the foreign exchange rate in Turkey is estimated. It is shown that there is a positive and strong relation between the exchange rate return and its volatility. Particularly, an increase in the exchange rate return (nominal depreciation) at time t results in an increase in its volatility at time t+1. However, the effect is asymmetric: a decrease in the exchange rate return at time t causes a relatively less decrease in volatility at time t+1. The result implies that the Central Bank would be biased in viewing the shocks to the foreign exchange rate in favor of appreciation. In other words, the volatility smoothing policy of the Central Bank might be a significant contributing factor in the real appreciation of the currency even if the foreign exchange rate system is officially a free-float. The paper is structured as follows. The next section introduces the asymmetric stochastic volatility model and its implications in a foreign exchange rate market framework. Section 3 reports the estimation method and results. The same section contains a discussion of the estimation results. We conclude afterwards.

Asymmetric stochastic volatility and the case for a leverage effect is less clear for exchange rates. This paper provides evidence for a positive relation between the foreign exchange return and its volatility during a floating exchange rate regime experience of a small open economy. The estimation results of an asymmetric stochastic volatility model indicate that an increase in the foreign exchange return results in an increase in its volatility during the next period. However, the estimated effect is asymmetric: a decrease in the exchange rate return does not result in a decrease in volatility as much. The result implies that a central bank with a volatility smoothing policy might be biased in viewing shocks to the foreign exchange rate in favor of appreciation. The bias would increase if the central bank has an implicit inflation targeting policy. The study can be extended to cover a larger sample of small economies with free floating exchange rate systems versus developed market economies to recover any differences or similarities in exchange rate dynamics.