Determinants of the currency crises in the Turkish economy: An econometric approach

With the liberalization in 1980s, Turkish economy experienced several financial crises. Crises increase both economic and social costs for an economy because of that preventing crisis is a very important issue. In this study, factors that caused the currency crises in Turkey, for the period January 1990 – June 2014, will be determined by Logit and Markov Regime Switching models with 12 different crisis definitions. In the study, results obtained from different model estimations partly produce differentiation for the variables causing currency crises. In two models; banks' foreign currency deposits to total deposit, short-term external debt to reserves, portfolio investment, Central Bank's total credits to the banking sector to total liabilities, broadly defined money supply to international reserves and inflation rate are the variables playing an important role in order to determine currency crises. It is thought that in the struggle against the currency crises, focusing on these leading indicators will improve prevention success.