Foreign exchange reserves and exchange rates in Turkey: Structural breaks, unit roots and cointegration 授課教授:楊奕農 學生:呂詩萱

introduction The main objective of this paper is to fill the gap by undertaking a study on the relationship between exchange rates (real and nominal) and foreign exchange reserves for the period 1982–2005 for Turkey, using cointegration and Granger causality testing.

Methodology Unit roots Cointegration Causality

Empirical results Table 1: Unit root test (without break): ADF Table 2: Unit root test (with break): Zivot and Andrews (1992) unit root test Note: Critical values at 1% and 5% significance level are −5.57 and −5.08 respectively (Zivot and Andrews, 1992

Empirical results Table 3 Engle–Granger cointegration testtest The 1% critical value is −3.500

Empirical Results Table 4: Gregory and Hansen (1996) cointegration tests ⁎, ⁎⁎ and ⁎⁎⁎ imply significance at 1%, 5% and 10%,

Empirical results Table 5 :Results of Granger causality tests: Real exchange rate and foreign exchange reserves Table 6: Results of Granger causality: nominal exchange rate and foreign exchange reserves ⁎,⁎⁎, ⁎⁎⁎ indicate significance level at 1%,5%, and 10%

Conclusion Our results show that foreign exchange reserves have significant effect on reducing the volatility of real and nominal exchange rates in the short run, which is very important for market players.