This study presents an analysis of the interactions between the realized and the expected values of a selected set of key-fundamentals that have to do with the current account balance, capital movements and the public-sector deficits in Turkey in the 1990-2007 period. The paper alsa addresses a current topic of discussion: Analyzing the market-dynamics that would start operating if a correction in the overvalued-YTL were to begin, the study demonstrates why and how an increase in the rate of depreciation of the YTL would lead to a series of dilemmas and concludes that a lasting solution to the problem is possible only via increases in the savings rate, the exports/GNP ratio and the rate of total factor productivity growth and a fall in the ratio of imported-inputs to the output of the industrial-sector.
Key words: Dynamics of currency crisis, market expectations, public-sector deficit nominal interest and exchange rates, current account deficit. Article Language: EnglishTurkish
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