Özet:

Reserve Options Mechanism, which is the option to hold FX or gold reserves in place of Turkish Lira reserve requirements of Turkish banks, is one of the innovative tools that the Central Bank of the Republic of Turkey has started to use recently. Reserve Options Mechanism is used in order to reduce the adverse effects of volatile short term capital flows on macroeconomic and financial stability. The effect of this tool on the exchange rate volatility is the main theme of this note. Our analysis indicates that Reserve Options Mechanism has a significant role in reducing the exchange rate volatility in the sample period.

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