Abstract

The aim of this paper is to analyze empirically the effects of short-term capital flows on exchange rates in Turkey under intermediate and flexible exchange rate regimes. In this framework, the periods where intermediate (January 1994-February 2001) and flexible (March 2001-September 2012) exchange rate regimes implemented in Turkey were taken as a base. The estimation results show that foreign exchange rate regimes are significant factors for the effects of short-term capital flows on exchange rates. While the short-term capital flows have significant effects on exchange rates in the flexible exchange rate regime, they have no significant effects on exchange rates in the intermediate exchange rate regimes. In the intermediate exchange rate regimes, price differentials have significant effects on exchange rates. These empirical results are consistent with the theory.

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