Turkey experienced hyperinflation in the late 1990s and early 2000s. The exchange rate for the Turkish lira was TRL650,000=$1 on January 1, 2001. In 2001, inflation in Turkey was 140%, while in the USA was only 2.5%. This led the Central Bank of Turkey to implement a mini-devaluation policy at the monthly rate of 7.5%. What was the official exchange rate on December 31, 2001? Was the Turkish lira properly valued? (Hint: Pay attention to the monthly devaluation process)

Turkey experienced hyperinflation in the late 1990s and early 2000s. The exchange rate for the Turkish lira was TRL650,000=$1 on January 1, 2001. In 2001, inflation in Turkey was 140%, while in the USA was only 2.5%. This led the Central Bank of Turkey to implement a mini-devaluation policy at the monthly rate of 7.5%. What was the official exchange rate on December 31, 2001? Was the Turkish lira properly valued? (Hint: Pay attention to the monthly devaluation process)

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter13: Open-economy Macroeconomics: Basic Concepts

Section: Chapter Questions

Problem 9PA

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