erc/metu
INTERNATIONAL CONFERENCE IN ECONOMICS  IV
September 13-16, 2000, Ankara

Possible Effects of US Dollar Anchoring instead of Basket Anchoring

Hasan Yurtoğlu (SPO)

Abstract

Turkey recently adopted a new three-year macroeconomic stabilization program primarily aiming to reduce the inflation rate to single digit levels by the end of 2002. Basically, this program seems to be an exchange rate based stabilization program, utilizing a basket of exchange rates rather than a single foreign currency. Because an exchange rate basket is used in this pegging policy, it might be said that this policy can not remove the indefiniteness sourced from the exchange rate market, as the values of exchange rates constituting the basket would change according to the parity. Moreover, it is a fact that the production costs are mostly based on US$ in Turkish economy. Consequently, using the US$ anchoring instead of basket anchoring could increase the success of the program. In this paper, validity of above idea is examined and possible effects of US$ anchoring is investigated.

Economic Research Center
Middle East Technical University
06531 Ankara Turkey
Phone: + 90 312 210 3044, 210 2003
Fax: +90 312 210 1244
e-mail: metuerc@metu.edu.tr