Some exchange rate determination,empirical analysis of models and exchange rate policies : The case of Turkey

The flexible exchange rate system has been launched after the collapseof the fixed exchange rate system in early 1970?s. However, as a result offluctuation and changes in exchange rates, the need to examine andimprove the exchance rate theories seems to be growing.Structure based on trade flows (a trade flows based structure) isfollowed by traditional exchange teories in the beginning. With financial flows,the impact of capital flows is more important. These new theories are basedon monetary and asset markets or portfolio balance approaches to thebalance of payments and see the exchange rates as a financialphenomenon.In this study, models of exchange rate determination are explained first.After mentioning Turkish foreign exchange rate market and policy,econometric analysis involving 1994 - 2005 years data is performed. Inanalysis, currency units of main trade partner countries of Turkey(A.B.D,Germany, England) are used. At first stage, regression analysis isperformed and variable coefficients are evaluated by checking economicaland statistical view. And then forecast performances of models are comparedby using error term statistics and regression analysis made by forecastvalues and real values is commented.As a result, monetary approach showing higher forecast performance isfound succesful. However, all structural models couldn?t analyse because ofnot finding all values to use.