RESERVE ADEQUACY IN TURKEY: A STUDY ON COMPARISON OF THE RESERVES WITH IMPORTS AND SHORT-TERM EXTERNAL DEBT*

Abstract

The changes in the international reserves of a country, which reflect the financial power of an economy and considered significantly by international investors, are of great importance in terms of financial stability and are taken into consideration increasingly in the academic literature. Two of the traditional criteria used by the International Monetary Fund to assess reserve adequacy is to compare the international reserve level of a country with the optimal reserve amount, which represents %25 of the annual imports and to compare net international reserve level with short-term external debt. The objective of this study is to investigate the international reserve adequacy in Turkey over the period of 2011:Q3-2018:Q4 based on this approaches by employing Fourier Granger causality test proposed by Enders and Jones (2016). The findings of the analysis indicate that while the reserves are adequate in Turkey according to the first approach, the reserves seem inadequate when taken into account the second approach in the relevant period.