Twin Crises in Turkey: A Comparison of Currency Crisis Models

Abstract

This paper analyzes the twin crises in Turkey experienced in 2000 and 2001. After a detailed survey of currency crisis models, together with a brief descriptive overview of the crises in Turkey, the similarities among the twin crises in Turkey and the models that have been developed to explain preceding crises in the world are investigated. It is found that the Turkish twin crises cannot be explained by using any individual generation of models, namely first generation models, second generation models or third generation models. Instead, a combination of these models is more appropriate to explain the details of the twin crises.

Keywords: Currency Crisis, Speculative Attack, Exchange Rate Targeting, Turkey

JEL Classification: E44, E52, E62