Predicting Crises in Turkey Using an Exchange Market Pressure Model and Four-Way Decomposition Analysis of Gross Capital Flows

  •  Gokhan Goksu    
  •  Eyup Kadioglu    
  •  Guray Kucukkocaoglu    


This study examines quarterly macroeconomic data in an attempt to reveal crises experienced in Turkey from 1998 to 2013 using an exchange market pressure model and analyze gross capital flows using a four-way decomposition analysis during. The results indicate that the exchange market pressure model successfully predicts the economic crisis following the 1998 Marmara earthquake, the February 2001 crisis and the effects of the 2008 global financial crisis in Turkey. The four-way decomposition is found to be more effective than the standard two-part differential analysis in explaining the relationship between crises and the inflow and outflow of domestic and foreign capital.

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