THE ASYMMETRIC RELATIONSHIP BETWEEN FOREIGN EXCHANGE RESERVES AND EXCHANGE RATE IN TURKEY: EVIDENCE FROM NARDL APPROACH

In this study, the asymmetric relationship between exchange rates and foreign exchange reserves has been investigated for the period of floating exchange regime in which exchange rates have determined depending on the supply and demand conditions in Turkey. In the analysis, using monthly data covering the period of February 2002 - June 2019, bound tests based on NARDL approach have been revealed the findings regarding the existence of the cointegration relationship between foreign exchange reserves and exchange rate. In the asymmetry tests, it has been concluded that asymmetry is valid in the exchange rate - reserves relationship in both long-term and short-term. The calculated long-term asymmetric coefficients indicate that foreign exchange reserves are more sensitive to the decreases in exchange rates. This results can be interpreted as the reflex of hoarding reserves dominates the fear of floating in Turkey in the mentioned period.