The Efficiency of stabilization policies exchange rate based: The Turkey example (1990-2000)

IV ABSTRACT In the countries in which the inflation is constantly increasing, it is observed that the arrangements basic macroeconomics changes are not sufficient to decrease the inflation. Thus, the applications aiming at decreasing the inflation require the use of nominal anchor to lead the expection related to inflation. In the countries experiencing constant inflation in most of the stabilization programs the exchange rate is chosen as nominal anchor. The programs in which exchange rate is chosen as nominal anchor and remained stable are called "exchange rate based stabilization (ERBS)". This study is aiming to examine the stabilization programs based on exchange rates in the frame of theories of stabilization programs and 1990- 2000 crisis experienced in Turkey by considering the other countries which experienced the similar crisis and used such programs; and it is aiming to examine the stabilization programs based on exchange rates, to test the purchasing power parity (PPP). And to search the efficiency level of exchange rate based stabilization on economy policies in that term. In the part of econometric applications of this study, to measure the efficiency of economic studies leading to the exchange rate based stabilization politics in 1990-2000 and, to test the validity of purchasing power parity. It is tested to real exchange rate which is the limited version of purchasing power parity by using unit root tests.In the end of this study, the purchasing power parity has been tested by using the data from Turkey which has higher inflation rate and USA which has compratively low inflation rate figures, and the existence of such on economic relation is refused after unit root test. Thus, it is seen that exchange rate based stabilization is not term the wrong applications on Turkey's economy caused economic crisis and the measures taken in this term could not reached its goals. After chosing the exchange rate as a nominal anchor had failed the authorities tend to chose the inflation itself as a nominal anchor. In this case there will be only short termed and limited arrangements on exchange rates and in the programs aiming to decrease the inflation in Turkey, the inflation will be anchor itself.