Browsing by Author "Aytac, Ozlem"

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    Exchange Rate-Based Stabilizations: A Literature Review
    (2017) Aytac, Ozlem
    The exchange rate-based stabilizations (ERBSs) that have been undertaken in chronic inflation countries have generated a controversial body of literature regarding the effects of disinflation programs, especially those on real consumption and output. This survey provides an extensive overview of the literature on ERBS. The paper covers various empirical studies that have attempted to document the macroeconomic regularities associated with ERBS, discussing both their strengths and their weaknesses. It analyzes diverse theoretical models that have been put forward to replicate the business cycles associated with ERBS, and sheds light on which models perform better using real data. The results suggest that durables incorporated weak credibility and sticky price model proves to be most compatible with the empirical regularities observed in the course of ERBS.
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    A Model of A Heterodox Exchange Rate Based Stabilization
    (2015) Aytac, Ozlem
    This paper attempts to explain the ERBS syndrome in Turkey by appeal to weak credibility cum sticky prices. By developing a model specifically for the 2000-2001 heterodox ERBS program in Turkey, I also depart from the existing literature which has focused almost exclusively in Latin America. What I aimed in this model is to generate the macroeconomic dynamics observed after the implementation of the program in Turkey. In order to assess the model's quantitative performance; it is calibrated by using data restrictions mainly from the Turkish economy. In addition to replicate the general qualitative effects of a currency peg, the model can successfully account quantitatively for the responses of consumption and current account balance and real exchange rate observed in Turkey. The closeness of the predicted consumption boom in the model and the actual boom in Turkey is particularly remarkable: 10.08% predicted increase in total consumption spending vs. 9.6% actual. And 37.06% predicted increase in durables spending vs. 39.5% actual. Overall, results indicate that sticky price model can explain the ERBS syndrome in Turkey to a great extend under the assumption that disinflation program is perceived by the public as non-credible. (c) 2014 Elsevier B.V. All rights reserved.