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Impact of Reserve Option Mechanism on Exchange Rate Volatility During the FED’s Tapering Period

Demirbas, Erkan and Can, Nurettin (2022) Impact of Reserve Option Mechanism on Exchange Rate Volatility During the FED’s Tapering Period. Journal of Central Banking Theory and Practice, 11 (3). pp. 155-178. ISSN 2336-9205

Full content URL: https://doi.org/10.2478/jcbtp-2022-0028

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Impact of Reserve Option Mechanism on Exchange Rate Volatility During the FED’s Tapering Period
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Impact of Reserve Option Mechanism on Exchange Rate Volatility During the FED’s Tapering Period
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Abstract

This study investigates the effectiveness of ROM. We conducted the GARCH (1,1) Model to determine whether ROM contributed to decreasing the volatility of USD/TL exchange rate for the period 2013- 2014. We construct four Models where four different variables are separately used that represent the ROM tool, i.e. the amount of FX reserves of CBRT via ROM, and the share of the FX reserves via ROM in Gross FX Reserves of CBRT. Our findings are convincing to say FX facility and the ratio of utilization for the FX facility to ensure the results are statistically meaningful during this period.

Keywords:Reserve Options Mechanism, Exchange Rate Volatility, Turkish Lira, Tapering, GARCH
Subjects:L Social studies > L100 Economics
L Social studies > L110 Applied Economics
L Social studies > L111 Financial Economics
Divisions:Lincoln International Business School
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ID Code:51982
Deposited On:04 Oct 2022 13:14

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