The impact of De Jure and De Facto exchange rate regimes on lite volatility of macroeconomic variables

Exchange rate regime choice is one of the most important macroeconomic policies. This paper examines the impact of exchange rate regimes on the volatility of macroeconomic variables in "de jure" and "de facto" classifications in Turkey for the period 1982-2007. By using iterated cumulated sum of squares algorithm, symmetric and asymmetric autoregressive conditional heteroscedasticity models with structural breaks are estimated. The results suggest that the volatility of exports, imports, total credit volume and stock price index is affected by de jure exchange rate regimes; whereas the volatility of foreign exchange reserves, nominal exchange rate, real exchange rate, exports and total Tukish Lira deposits is influenced by de facto exchange rate regimes. These results indicate that there is neither "de jure regime neutrality" nor "de facto regime neutrality".