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Journals / BİLTÜRK Ekonomi ve İlişkili Çalışmalar Dergisi / 2020 / Cilt: 2 - Sayı: 2

Financial Stability and Reserve Option Mechanism as Automatic Stabilizer

Bengül Gülümser KAYTANCI
Burak BUYUN
Pages
410–429
Publication Date
2020-03-13
DOI
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AI Summary & Key Takeaways

AI Insight
⚡ TL;DR(Too Long; Didn't Read)

As a result of impulse response analysis findings show that the ROM works as an automatic stabilizer, but this function is not symmtrical and efficient, and works of ROM will be better with more stable financial system.

📌 3 Key Takeaways

🎯
Objective & Hypothesis:The Reserve Option Mechanism (ROM) is a macro-prudential policy instrument that allows the holding of a certain portion of the Turkish Lira required reserves in foreign currency or gold.
📊
Key Findings & Data:Automatic stabilizer function of ROM was investigated the effect of capital flows, exchange rate and usage of ROM variables on ROM by the impulse response analysis.
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Conclusion & Impact:As a result of impulse response analysis findings show that the ROM works as an automatic stabilizer, but this function is not symmtrical and efficient, and works of ROM will be better with more stable financial system.
🔬Design:Modeling & Simulation
📍Scope:Comprehensive Sample
⚙️Variables:: reserve options mechanism · financial stability · impulse response analyses

Abstract

The Reserve Option Mechanism (ROM) is a macro-prudential policy instrument that allows the holding of a certain portion of the Turkish Lira required reserves in foreign currency or gold. This study contains the automatic stabilizer feature of ROM designed by the Central Bank of the Republic of Turkey (CRBT) to provide post-crisis financial stability which investigates through vector error correction (VEC) model. Automatic stabilizer function of ROM was investigated the effect of capital flows, exchange rate and usage of ROM variables on ROM by the impulse response analysis. As a result of impulse response analysis findings show that the ROM works as an automatic stabilizer, but this function is not symmtrical and efficient, and works of ROM will be better with more stable financial system.

Özet

The Reserve Option Mechanism (ROM) is a macro-prudential policy instrument that allows the holding of a certain portion of the Turkish Lira required reserves in foreign currency or gold. This study contains the automatic stabilizer feature of ROM designed by the Central Bank of the Republic of Turkey (CRBT) to provide post-crisis financial stability which investigates through vector error correction (VEC) model. Automatic stabilizer function of ROM was investigated the effect of capital flows, exchange rate and usage of ROM variables on ROM by the impulse response analysis. As a result of impulse response analysis findings show that the ROM works as an automatic stabilizer, but this function is not symmtrical and efficient, and works of ROM will be better with more stable financial system.

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Cite This Article

KAYTANCI, B. G., BUYUN, B. (2020). Financial Stability and Reserve Option Mechanism as Automatic Stabilizer. BİLTÜRK Ekonomi ve İlişkili Çalışmalar Dergisi, Cilt: 2 - Sayı: 2, 410–429. https://ajindex.com/articles/6287

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