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Currency Substitution: Evidence from Turkey

Posted: 15 Feb 2010  

Bahattin Buyuksahin

Bank of Canada

Date Written: February 14, 2010


This paper investigates the importance of substitution between domestic and foreign currencies for a high-inflation economy, namely Turkey. Imrohoroglu’s (1994) dynamic money in the utility function model is estimated and tested using the Generalized Method of Moments technique to analyze the economic significance of currency substitution in Turkey. Our results show that, while currency substitution may not have been an important phenomenon up to 1993, it subsequently gained importance especially after the 1994 financial crisis.

Keywords: Currency Substitution, Dollarization

JEL Classification: F31

Suggested Citation

Buyuksahin, Bahattin, Currency Substitution: Evidence from Turkey (February 14, 2010). Available at SSRN:

Bahattin Buyuksahin (Contact Author)

Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9

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