Dynamic Optics in Economics: Quantitative, Experimental and Econometric Analyses, Hale Kırer Silva Lecuna, Editör, Peter Lang Publishing, Inc., Berlin, ss.11-29, 2020
Emerging markets are reflecting highly volatile exchange rates. Turkish
economy, apart from being exposed to exchange rate fluctuations, is fragile due to its
dependence on imports. The aim of this paper is to analyze the exchange rate fluctuations
in Turkish economy under the following steps: (i) to run principal component-guided
sparse regression (PC-LASSO) which is a method for large data to shrink predictions
toward the most important variable for volatility out of many potential domestic and
international macroeconomic indicators, (ii) to estimate a threshold level for the main
determinant of the volatility and examine the impact of these macroeconomic indicators
using structural threshold regression model. The empirical findings suggest the international reserves of the central bank as the most important variable for volatility and that
the threshold regression reflects the nonlinearity of the model.