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Exchange Rate Forecasting Based on Fundamental Macroeconomic Variables in a Floating Exchange Rate Regime: Evidence from an Emerging Economy

Exchange Rate Forecasting Based on Fundamental Macroeconomic Variables in a Floating Exchange Rate Regime: Evidence from an Emerging Economy

Yesim Helhel, Seref Kalayci
Copyright: © 2012 |Volume: 3 |Issue: 3 |Pages: 7
ISSN: 1947-8402|EISSN: 1947-8410|EISBN13: 9781466614130|DOI: 10.4018/jsesd.2012070102
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MLA

Helhel, Yesim, and Seref Kalayci. "Exchange Rate Forecasting Based on Fundamental Macroeconomic Variables in a Floating Exchange Rate Regime: Evidence from an Emerging Economy." IJSESD vol.3, no.3 2012: pp.15-21. http://doi.org/10.4018/jsesd.2012070102

APA

Helhel, Y. & Kalayci, S. (2012). Exchange Rate Forecasting Based on Fundamental Macroeconomic Variables in a Floating Exchange Rate Regime: Evidence from an Emerging Economy. International Journal of Social Ecology and Sustainable Development (IJSESD), 3(3), 15-21. http://doi.org/10.4018/jsesd.2012070102

Chicago

Helhel, Yesim, and Seref Kalayci. "Exchange Rate Forecasting Based on Fundamental Macroeconomic Variables in a Floating Exchange Rate Regime: Evidence from an Emerging Economy," International Journal of Social Ecology and Sustainable Development (IJSESD) 3, no.3: 15-21. http://doi.org/10.4018/jsesd.2012070102

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Abstract

Developing countries had a fixed exchange rate regime and avoided financial liberalization until the 1990’s. In the early 2000’s however, most of the developing countries abandoned their fixed exchange rate regimes in favor of floating rate regimes which in turn increased the importance of exchange rate forecasting in the emerging market economies. This paper intends to explain TR/USD (Turkish Lira/American Dollar) exchange rates by using macroeconomic fundamentals for the period between February 2001 and December 2009 on a monthly basis. A Vector Auto Regression (VAR) method is used. Among the macroeconomic Fundamentals, United States Federal Reserve Benchmark interest rates, one month Turkish Treasury Bill yields, Turkish import/export rates, m2 money supply and foreign direct investment explain the changes in TR / USD exchange rates.

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