One of the main duties of the CBRT is to determine and implement the exchange rate regime in Turkey jointly with the Government. It is vested with the authority and tasked to frame and implement the exchange rate policy in line with this exchange rate regime. The CBRT decides on its exchange rate policy in compliance with the monetary policy objectives. In case of a change in the monetary policy, the exchange rate policy may also be revised.
After the economic crisis in 2001, Turkey adopted the floating exchange rate regime under which exchange rates are determined by supply and demand conditions in the market.
The key factors affecting foreign exchange supply and demand are:
- Monetary and fiscal policies,
- Economic infrastructure,
- International developments,
The exchange rate is not used as a policy instrument in the floating exchange rate regime and thus, the CBRT does not set any nominal or real exchange rate target. However, the CBRT takes measures against excessive appreciation or depreciation of the Turkish lira to reduce financial stability risks.
Additionally, the CBRT is responsible for keeping and managing Turkey’s gold and foreign exchange reserves. International reserves refer to ready-to-use assets accepted as an international payment instrument which are usually controlled by countries’ monetary authorities and are convertible to other currencies.