FOREIGN EXCHANGE PAYMENTS OF THE TREASURY AND EXCHANGE RATE DYNAMICS OF TURKEY

In this study, the effect of coupon payments of 30-year Treasury bonds sold in the years of 2000 and 2004 on the exchange rates changes and exchange rate volatility in the payment date are investigated. Models are estimated with EGARCH (1.1) method in the study which uses daily USD/TL exchange rates between 03 Jan 2000 and 08 Apr 2015 period. Our findings show that coupon payments of the bonds with the maturity dates of 2030 and 2034 decrease the exchange rate level and exchange rate volatility. However, the decreasing effect of the bond with the maturity dates of 2034 on exchange rates is higher. Evaluating coupon payments of both bonds together, it is observed that Treasury coupon payments in Turkey have a decreasing effect on exchange rate level and exchange rate volatility. The study disproves the claims of Effective Market Hypothesis which says “exchange rate cannot be predicted; exchange rates reflect all available information so investors cannot gain abnormal profits”.