"An analysis of the exchange rate regime of Turkey, considering the impossible trinity phenomenon”
The aim of this study is to evaluate whether the exchange rate regime of Turkey is an appropriate one, considering the monetary policy and the capital account of the country. Regarding Turkey’s past experiences with the severe financial and currency crises, the issue of the exchange rate regime choice becomes significant. The theoretical and the empirical studies about the choice of exchange rate regimes as well as the classification of them are highly controversial. The key standpoint in this study is that the impossible trinity phenomenon has some shortcomings and developing countries need some kind of capital controls. The free floating exchange rate regime, the inflation targeting strategy and an open capital account may not be an appropriate framework for a developing country like Turkey.