Özet:

Carry trade, which is based on short-term financial investments from low interest currencies and high interest currencies, is one of the most used investment strategies in recent years. Short-term capital movements, as it is known, lead to hot currency flows, increasing the fragility of the financial system and decreasing its resilience. The aim of this study is to identify the variables that must be followed when creating policies against the instabilities that can be caused by the heavy-powered carry trade investments. For this purpose, using the variables that represent profit and risk elements in the study, the ARDL border test approach tested the empirical determiners of the carry trade investment strategy in Turkey in the period January 2014-2018 May.  According to the findings obtained, it has been found that carry trade investments towards Turkey in the examined period are not sensitive to interest differences between the countries. However, the currency rate play and the return level are other findings obtained from the study that carry trade investments are among the important determinants in the relevant period. It has also been concluded that the global volatility level, which is a significant risk indicator for foreign investors, is significantly obstructive for carry trade investments. These findings indicate that TCMB’s policy interest increase will not lead to foreign capital entry by making carry trade investments more attractive. Therefore, instead of activist currency policies where interest rates are frequently changed, focusing on policies to ensure the stability of exchange rates seems appropriate to prevent the destabilizing effects of carry trade investments.