Reserve Option Mechanism : Does it Work as an Automatic Stabilizer?
Central Bank of the Republic of Turkey (CBRT) designed and implemented a new scheme since end-2011, called reserve options mechanism (ROM) in order to alleviate the adverse impact of capital flow volatility on the domestic economy. Although there are numerous studies on the mechanics of ROM, there has been no attempt to investigate the determinants of the ROM utilization in practice. In this paper, we aim to fill this gap by using bank-level data to assess the behavioral aspects of ROM. Our results suggest that the relative cost of Turkish lira funding to foreign currency funding as well as the reserve option coefficients set by the CBRT largely explains the variations in the ROM utilization. We find that the most relevant proxy for the cost of Turkish lira funding for banks is overnight money market interest rates and the weighted average cost of CBRT funding. Moreover, foreign currency liquidity does not seem to be a significant parameter in driving the utilization of ROM. We argue that the systematic policy induced movements in the short term domestic interest rates—higher during outflows, lower during inflows—may undermine the automatic stabilizer feature of ROM. And we propose an adjustment in the remuneration of reserve requirements to strengthen the automatic stabilizer effect of ROM.
Reserve Options Mechanism: The New Monetary Policy Tool of CBRT and Its Effect on Exchange Rate Volatility
Purpose – Reserve Options Mechanism (ROM) is a new policy tool of Central Bank of the Republic of Turkey (CBRT). In this study, it is aimed to examine the effect of the ROM on USD/TL exchange rate volatility. Design/methodology/approach – The effects of the ROM and the direct foreign exchange interventions and auctions of CBRT on the USD/TL exchange rate volatility are analyzed by applying GARCH (1,1) model and using the data for the period 09.30.2011-06.03.2016. Findings – It is found that the ROM significantly decreases the exchange rate volatility, which indicates the effectiveness of the ROM. The interventions of the CBRT also decrease the volatility but they do not play a significant role. Research limitations/implications – Although all available data for the ROM since the beginning of the mechanism are used, one of the limitations of the study is that the ROM and also the interventions of the CBRT are not the only explanatory variables for the USD/TL exchange rate volatility. However, the results imply that the ROM is an efficient policy tool and contributes to the financial stability. Originality/value – Since the ROM is introduced by CBRT recently, there are only a few empirical researches examining the effect of the ROM on exchange rate volatility. This study covers a longer and more recent time period than previous studies.
Image Projection in Immersive 3D Visualization Laboratory
In recent years, many centers in the world attempted to build a virtual reality laboratory. The main idea of such laboratory is to allow the user to “immerse” into and move in a computer-generated virtual world. In the paper, the underlying principles of the system of virtual reality (VR) are described. The selected implementations constructed by the research centers of the world are also presented. The cave automatic virtual environment (CAVE) installation is planned to be implemented at the Gdansk University of Technology. In this solution, the images will be projected on flat screens arranged in the form of a cube. The user will be located inside a transparent sphere freely rotating inside a cube, which allows simulation of free movement without changing the position of the screens. A walking motion of the user will trigger changes in the computer-generated images on screens surrounding the sphere thus creating an illusion of motion. The problems of visualization in the planned installation are outlined and discussed.