Central Bank Review

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ISSUES CENTRAL BANK REVIEW ISSUES Choose issue to view: Volume:7, Number:2 - July 2007Volume:7, Number:1 - January 2007Volume:6, Number:2 - July 2006Volume:6, Number:1 - January 2006Volume:5, Number:2 - July 2005Volume:5, Number:1 - January 2005Volume:4, Number:2 - July 2004Volume:4, Number:1 - January 2004Volume:3, Number:2 - July 2003Volume:3, Number:1 - January 2003Volume:2, Number:2 - July 2002Volume:2, Number:1 - January 2002Volume:1, Number:1 - May 2001 July 2007 Volume:7, Number:2 Are the Transition Stock Markets Efficient? Evidence from Non-Linear Unit Root Tests Author(s): Mübariz Hasanov, Tolga Omay Abstract: In this paper we address efficiency of eight transition stock markets, namely, Bulgarian, Chinese, Czech, Hungarian, Polish, Romanian, Russian and Slovakian stock markets by testing whether the price series of these markets contain unit root. For this purpose we employ the nonlinear unit root test procedure recently developed by Kapetanios et al. (2003) that has a better power than standard unit root tests when series under consideration are characterised by a slower speed of mean reversion. The results of nonlinear unit root tests indicate that only Bulgarian, Czech, Hungarian and Slovakian price series contain unit root, consistent with weak form efficiency. JEL Classification Codes: C22, G14. Keywords: Market Efficiency, Non-linear models, transition markets. URL: http://www.tcmb.gov.tr/research/cbreview/july07-1.pdf Long Memory in the Turkish Stock Market Return and Volatility Author(s): Adnan Kasman, Erdost Torun Abstract: This paper examines the dual long memory property of the Turkish stock market. The data set consists of daily returns, and long memory tests are carried out both for the returns and volatility. The results indicate that long memory dynamics in the returns and volatility might be modeled by using the ARFIMA-FIGARCH model. The results of the ARFIMAFIGARCH model show strong evidence of long memory in both returns and volatility. The long memory in returns implies that stock prices follow a predictable behavior, which is inconsistent with the efficient market hypothesis. The evidence of long memory in volatility, however, shows that uncertainty or risk is an important determinant of the behavior of daily stock data in the Turkish stock market. JEL Classification Codes: C22, C50. Keywords: ARFIMA; FIGARCH; Long memory; Turkish stock market. URL: http://www.tcmb.gov.tr/research/cbreview/july07-2.pdf Real Exchange Rate Fluctuations and Relative Prices in Turkey Author(s): Uğur Çıplak Abstract: Traditional theory puts forwards that real exchange rate fluctuations should result from the changes in the relative price of non-tradable goods since tradable goods' prices are to equalize among countries due to the law of one price. However, significant number of researches reported that in many cases, the contribution of tradable goods' prices is not negligible, or even surpass that of the non-tradable goods' prices. This paper studies the relation between the real exchange rate and relative prices for Turkey. The relation is found to be stronger with the relative price of tradable goods, unlike the traditional theory. But the proportion of the fluctuations in real exchange rates accounted for by relative non-tradable goods prices has increased in recent years. These findings imply the real exchange rates in Turkey to be driven by nominal factors, rather than real factors until recently. JEL Classification Codes: C10, F31, and F41. Keywords: Real Exchange Rate Decomposition, Relative Prices. URL: http://www.tcmb.gov.tr/research/cbreview/july07-3.pdf