Use VAR to estimate exchange rate

timer Asked: Oct 11th, 2013

Question description

My RawDataa.xlsxmy-data.xlsxaim is to estimate using VAR, how the currency substitution, exchange rate, real effective exchange rate and  interest rate behave. Currency substitution data I achieved by dividing the foreign currency deposits by the M2 definition of money supply. The exchange rate is the USD/Turkish Lira exchange rate, real effective exchange rate I obtained from the Central Bank database and the interest rate is the maximum annual rate paid to turkish lira deposits.
In January 2005, the Turkish Lira was redenominated, by taking off 6 zeros from the currency. So I would like to find out if this has effected the currency substitution growth. I suspect it should have a negative impact since this would increase the confidence in the turkish lira.
I need to find out the impulse responses of currency substitution to changes in the exchange rate, real effective exchange rate and also to deposit rate.
I guess we'd need to take natural logs of all but the interest rate. And introduce a dummy variable for the years from 2005 onwards.

Tutor Answer

(Top Tutor) Studypool Tutor
School: Boston College
Studypool has helped 1,244,100 students
flag Report DMCA
Similar Questions
Hot Questions
Related Tags

Brown University

1271 Tutors

California Institute of Technology

2131 Tutors

Carnegie Mellon University

982 Tutors

Columbia University

1256 Tutors

Dartmouth University

2113 Tutors

Emory University

2279 Tutors

Harvard University

599 Tutors

Massachusetts Institute of Technology

2319 Tutors

New York University

1645 Tutors

Notre Dam University

1911 Tutors

Oklahoma University

2122 Tutors

Pennsylvania State University

932 Tutors

Princeton University

1211 Tutors

Stanford University

983 Tutors

University of California

1282 Tutors

Oxford University

123 Tutors

Yale University

2325 Tutors