Prof. Dr. Turalay Kenc
Qualification:PhD in Economics at the University of York, England.
Fields/Area of Specialization:Regulatory finance
Prof Turalay has gained work and consultancy experience from a range of countries and institutions including US Fed, UK OMFIF, Canadian think tank the Centre for International Governance Innovation and the Kazakhstan National Bank. He worked at several UK universities including the University of Cambridge, Birkbeck College London, the University of Durham, Imperial College London at different capacities. Before joining the Central Bank of the Republic of Turkey as a Board Member in April 2009, he was Professor of Finance at the Bradford University School of Management. He also served as chair of the Bank for International Settlements’ Irving Fisher Committee on Central Bank Statistics and editor-in-chief of the Central Banking Review-Journal.

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Showing results 1 to 20 of 21
  • The_2007-2009_financial_crisis_global_imbalances_and_capital_flows_Turalay_Sel.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc; Sel Dibooglu (2010)

  • The paper discusses the currents that led to the 2007-2009 financial crisis. We discuss the crisis in a historical context and present evidence regarding the incidence and unit price of risk. Our results show that the unit price of risk prior to the subprime crisis is comparable to the price of risk prior to the great depression and similar to the price of risk at onset of the technology bubble. We then discuss global imbalances, the associated risks with regard to international optimal allocation of capital, and arrangements to minimize problems of global imbalances.

  • Alibaba'larin_dunyasina_hazirlik_acik_bankacilik_duzenlemeri_Turalay_Bugra.pdf.jpg
  • Journal Article


  • Authors: Bugra Sabri Usakli; Turalay Kenc (2022)

  • Technological revolution, avalanche-growing financial technology (FinTech) companies, customers waiting for unlimited service, and regulations based on data sharing point to a new era in banking. The new era, open banking, provides an expansion of the scope of banking services offered in a wide geography from European Union countries to China, from the United States to South American countries. In the new period, it is aimed to provide more innovative, inclusive and practical services by sharing the authorized data of customers with FinTech companies. It is seen that the countries show significant differences and similarities in their open banking practices. In this descriptive study,...

  • Bank_default_indicators_with_volatility_clustering_Turalay et al.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc; Emrah Ismail Cevik; Sel Dibooglu (2021)

  • We estimate default measures for US banks using a model capable of handling volatility clustering like those observed during the Global Financial Crisis (GFC). In order to account for the time variation in volatility, we adapted a GARCH option pricing model which extends the seminal structural approach of default by Merton (J Finance 29(2):449, 1974) and calculated "distance to default" indicators that respond to heightened market developments.With its richer volatility dynamics, our results better reflect higher expected default probabilities precipitated by the GFC. The diagnostics show that the model generally outperforms standard models of default and offers relatively good indica...

  • Corporate_bankruptcies_and_official_bail_outs_Turalay_Aydin_Gulcin.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc; Aydin Ozkan; F. Gulcin Ozkan (2005)

  • The existence of government guarantees to bail out investors and the use of official support to prevent corporate bankruptcies are commonly viewed to have largely contributed to the financial fragilities of many emerging market economies during the 1990s. This paper attempts to rationalize the existence and the duration of such policies. By using a simple model of the economy, we formalize governments' decision on how long to provide resources to bridge the gap between the corporate sector's earnings and obligations. By considering both the costs and benefits of bail-outs in an environment where there are unfavorable productivity shocks, we show that the bail-out policy ends sooner; t...

  • Demographic_shock_transmission_from_large_to_small_countries_Turalay.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc; Serdar Sayan (2001)

  • International commodity and capital flows provide channels for the transmission of the effects of demographic changes in large countries onto small open economies by altering the prices and interest rates facing them. This implies that even small countries with relatively young populations are potentially vulnerable to the effects of population aging in large industrial economies. To address this issue, which has largely been overlooked in previous literature, this paper considers the case of European Union and Turkey and shows, within an overlapping generations general equilibrium framework, that spillovers of the demographic shock in Europe would intensify the changes that Turkey wo...

  • Do_retail_gasoline_prices_rise_more_readily_than_they_fall_Turalay_Salim_Sel.pdf.jpg
  • Journal Article


  • Authors: Salim Al-Gudhea; Turalay Kenc; Sel Dibooglu (2007)

  • This paper revisits the controversy over whether retail gasoline prices respond to increases in upstream prices more rapidly than decreases. Using threshold and momentum models of cointegration and daily data at different stages in the distribution chain, we find that transmission between upstream and downstream prices is mostly asymmetric in the momentum model: increases in upstream prices are passed on to downstream prices more quickly than decreases. We distinguish between small and large shocks and show that the asymmetry is more pronounced for small shocks, which may be due to consumer search costs.

  • item.jpg
  • Journal Article


  • Authors: John Driffill; Turalay Kenc; Martin Sola; Fabio Spagnolo (2009)

  • We examine several discrete-time versions of the Cox, Ingersoll and Ross (CIR) model for the term structure, in which the short rate is subject to discrete shifts. Our empirical analysis suggests that careful consideration of which parameters of the short-term interest rate equation that are allowed to be switched is crucial. Ignoring this issue may result in a parameterization that produces no improvement (in terms of bond pricing) relative to the standard CIR model, even when there are clear breaks in the data.

  • Estimating_volatility_clustering_and_variance_risk_premium_effects_on_bank_default_indicators_Turalay_Emrah.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc (2021)

  • Default risk increases substantially during financial stress times due to mainly the two reasons: volatility clustering and investors' desire to protect themselves from such increases in volatility. It manifested in the aftermath of the Global Financial Crisis of 2008-2009 with unpleasant outcomes of many bankruptcies and severe financial distress. To account for these features, we adapted the structural credit risk approach to include both time-varying (return) volatility and risk premium about the return volatility itself. By applying the model to US banks, we obtain better bank default indicators in comparison to the benchmark models.

  • Financial_stress_and_economic_activity_in_some_emerging_Asian_economies_Turalay et al.pdf.jpg
  • Journal Article


  • Authors: Emrah I. Cevik; Sel Dibooglu; Turalay Kenc (2016)

  • This paper investigates episodes of financial stress and its relationship to economic activity in some Southeast Asian economies. To that end, we use a dynamic factor model to construct a financial stress index for Indonesia, South Korea, Malaysia, the Philippines, and Thailand and examine the relationship between financial stress and economic activity. Our financial stress index consists of riskiness in the banking sector, security market risk, currency risk, external debt and sovereign risk. Empirical results indicate that our financial stress index tracks recessions closely in the sample and impulse response functions suggest financial stress causes significant economic slowdowns.<...

  • item.jpg
  • Journal Article


  • Authors: Lynne Evans; Turalay Kenc (2004)

  • We compare actual and calibrated values for the foreign exchange risk premium based on the definition in [J. Int. Econ. 32 (1992) 305]. Calibrated values are found from within a dynamic stochastic general equilibrium model of a small open economy consisting of risk averse optimizing agents with unconventional preferences. We find that the equilibrium foreign exchange risk premium is a function of exogenous shocks in the model and is sensitive to assumed attitudes towards risk. Furthermore, various forms of policy uncertainty improve the capacity of the model to generate values closer to those found in the data.

  • Growth_and_welfare_effects_of_monetary_volatility_Turalay.pdf.jpg
  • Journal Article


  • Authors: Lynne Evans; Turalay Kenc (2001)

  • In this paper we use a continuous-time, stochastic, dynamic general equilibrium model to provide estimates of the growth and welfare effects of monetary volatility. Our primary concern is to highlight the long-run consequences of different monetary environments in a small open economy. Using UK-relevant data to set key parameter values in the model, we carry out three policy experiments. We find that (i) eliminating monetary growth shocks and (ii) reducing the infation rate can each generate positive growth and welfare effects, while (iii) reducing the interest rate depresses growth and is welfare deteriorating. However, these results are sensitive to the values set for the risk avers...

  • Inflation_and_sovereign_default_Turalay.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc; William Perraudin; Paolo Vitale (2001)

  • Recent research has highlighted the role that the government budget constraint plays in determining the consumer price level. According to the fiscal approach to price determination, prices adjust so that the discounted value of future real government primary surpluses equals the current real value of public debt. An important implication is that the probability of a crisis involving default on public debt may directly affect consumer prices. This paper examines the interaction of prices and sovereign insolvency crises using simple, continuous-time models of the government budget constraint.

  • The_influence_of_firms_financial_policy_on_tax_reform_Turalay.pdf.jpg
  • Journal Article


  • Authors: John P. Hutton; Turalay Kenc (1998)

  • The effectiveness of proposed reforms to the tax system intended to stimulate investment depends on how capital structure affects corporate behaviour. A dynamic general equilibrium model, calibrated for the UK, is used to investigate the difference between three models of financial structure, including one of endogenous structure motivated by agency theory. It is shown that the difference in predicted effects can be significant, and that the impact of the reform on the marginal source of funds is crucial.

  • International_banking_and_cross_border_effects_of_regulation_Turalay et al.pdf.jpg
  • Journal Article


  • Authors: Yusuf Soner Baskaya; Mahir Binici; Turalay Kenc (2017)

  • How do regulatory changes in a foreign country affect the lending growth in another country? This paper addresses this question using bank-level data from Turkey and macroprudential measures from fifty-six countries over a sample period of 2006-13. We offer evidence for the existence of the inward transmission of foreign prudential regulations by showing that the macroprudential tightening abroad leads to lending growth by the banks in Turkey. We find that domestic affiliates of foreign banks play a more prominent role in this transmission. We show that the existence and the magnitude spillovers differ across bank characteristics or the prudential instruments. Finally, our results ind...

  • Leverage, uncertainty and investment decisions_Turalay.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc; Ciaran Driver (2020)

  • We explore the role of taxes on stimulating investment decisions for levered firms under cashflows and investment costs uncertainty using the adjusted present value-based real options approach developed by Myers and Read (2019). We extend their work to consider combined tax credits and uncertain investment costs. We then run a numerical analysis to quantify the impact of uncertainty, corporate tax and investment tax credit in stimulating investments.

  • Measuring_financial_stress_in_Turkey_Turalay et al.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc (2013)

  • This study examines episodes of financial stress and develops a financial stress index for the Turkish economy for the 1997-2010 period. We consider various variables that summarize different aspects of financial conditions in the economy to gauge financial stress. We construct the index and show that financial stress affects economic activity significantly. Specifically, the index is a leading indicator of economic activity in Turkey. We then discuss how information provided by the financial stress index can be used to fine tune macroeconomic policy.

  • Real_options_with_priced_regime_switching_risk_Turalay et al.pdf.jpg
  • Journal Article


  • Authors: John Driffill; Turalay Kenc; Martin Sola (2013)

  • We develop a model of regime-switching risk premia as well as regime-dependent factor risk premia to price real options. The model incorporates the observation that the underlying risky income streams of real options are subject to discrete shifts over time as well as random changes. The presence of discrete shifts is due to systematic and unsystematic risk associated with changes in business cycles or in economic policy regimes or events such as takeovers, major changes in business plans. We analyze the impact of regime-switching behavior on the valuation of projects and investment opportunities. We find that accounting for Markov switching risk results in a delay in the expected tim...

  • The_spirit_of_capitalism_asset_pricing_and_growth_in_a_small_open_economy_Turalay_Sel.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc; Sel Dibooglu (2007)

  • Conventional models of economic behavior have failed to account for a number of observed empirical regularities in macroeconomics and international economics. This may be due to preference specifications in conventional models. In this paper, we consider preferences with the "spirit of capitalism" (the desire to accumulate wealth as a way of acquiring status). We analyze a number of potential effects of international catching-up and the spirit of capitalism on savings, growth, portfolio allocation and asset pricing. Moreover, we obtain a multi-factor Capital Asset Pricing Model (CAPM). Our results show that status concerns have non-trivial effects on savings, growth, portfolio allocat...

  • Taxation_risk-taking_and_growth_Turalay.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc (2004)

  • This paper investigates the equilibrium relationship between taxation, portfolio choice (risk-taking) and capital accumulation. Specifically, it examines how taxes affect risk-taking and capital accumulation. We extend the existing literature by relaxing two crucial assumptions in modelling risk-taking behavior: (i) that the investment opportunity set is fixed and (ii) that there is no distinction between attitudes towards risk and behavior towards intertemporal substitution. We extend the investment opportunity set of individuals through optimally determined human capital; and distinguish intertemporal substitution from attitudes towards risk via a recursive utility function. In the ...

  • Welfare_cost_of_inflation_in_a_stochastic_balanced_growth_model_Turalay_Sel.pdf.jpg
  • Journal Article


  • Authors: Sel Dibooglu; Turalay Kenc (2009)

  • There is a large and growing literature on the welfare cost of inflation. However, work in this area tend to find moderate estimates of welfare gains. In this paper we reexamine welfare costs of inflation within a stochastic general equilibrium balanced growth model paying a particular attention to recursive utility, portfolio balance effects, and monetary volatility and monetary policy uncertainty. Our numerical analysis shows that a monetary policy that brings down inflation to the optimum level can have substantial welfare effects. Portfolio adjustment effects seem to be the dominant factor behind the welfare gains.

Prof. Dr. Turalay Kenc
author picture
Qualification: PhD in Economics at the University of York, England.
Fields/Area of Specialization: Regulatory finance
Prof Turalay has gained work and consultancy experience from a range of countries and institutions including US Fed, UK OMFIF, Canadian think tank the Centre for International Governance Innovation and the Kazakhstan National Bank. He worked at several UK universities including the University of Cambridge, Birkbeck College London, the University of Durham, Imperial College London at different capacities. Before joining the Central Bank of the Republic of Turkey as a Board Member in April 2009, he was Professor of Finance at the Bradford University School of Management. He also served as chair of the Bank for International Settlements’ Irving Fisher Committee on Central Bank Statistics and editor-in-chief of the Central Banking Review-Journal.
Showing results 1 to 20 of 21
  • The_2007-2009_financial_crisis_global_imbalances_and_capital_flows_Turalay_Sel.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc; Sel Dibooglu (2010)

  • The paper discusses the currents that led to the 2007-2009 financial crisis. We discuss the crisis in a historical context and present evidence regarding the incidence and unit price of risk. Our results show that the unit price of risk prior to the subprime crisis is comparable to the price of risk prior to the great depression and similar to the price of risk at onset of the technology bubble. We then discuss global imbalances, the associated risks with regard to international optimal allocation of capital, and arrangements to minimize problems of global imbalances.

  • Alibaba'larin_dunyasina_hazirlik_acik_bankacilik_duzenlemeri_Turalay_Bugra.pdf.jpg
  • Journal Article


  • Authors: Bugra Sabri Usakli; Turalay Kenc (2022)

  • Technological revolution, avalanche-growing financial technology (FinTech) companies, customers waiting for unlimited service, and regulations based on data sharing point to a new era in banking. The new era, open banking, provides an expansion of the scope of banking services offered in a wide geography from European Union countries to China, from the United States to South American countries. In the new period, it is aimed to provide more innovative, inclusive and practical services by sharing the authorized data of customers with FinTech companies. It is seen that the countries show significant differences and similarities in their open banking practices. In this descriptive study,...

  • Bank_default_indicators_with_volatility_clustering_Turalay et al.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc; Emrah Ismail Cevik; Sel Dibooglu (2021)

  • We estimate default measures for US banks using a model capable of handling volatility clustering like those observed during the Global Financial Crisis (GFC). In order to account for the time variation in volatility, we adapted a GARCH option pricing model which extends the seminal structural approach of default by Merton (J Finance 29(2):449, 1974) and calculated "distance to default" indicators that respond to heightened market developments.With its richer volatility dynamics, our results better reflect higher expected default probabilities precipitated by the GFC. The diagnostics show that the model generally outperforms standard models of default and offers relatively good indica...

  • Corporate_bankruptcies_and_official_bail_outs_Turalay_Aydin_Gulcin.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc; Aydin Ozkan; F. Gulcin Ozkan (2005)

  • The existence of government guarantees to bail out investors and the use of official support to prevent corporate bankruptcies are commonly viewed to have largely contributed to the financial fragilities of many emerging market economies during the 1990s. This paper attempts to rationalize the existence and the duration of such policies. By using a simple model of the economy, we formalize governments' decision on how long to provide resources to bridge the gap between the corporate sector's earnings and obligations. By considering both the costs and benefits of bail-outs in an environment where there are unfavorable productivity shocks, we show that the bail-out policy ends sooner; t...

  • Demographic_shock_transmission_from_large_to_small_countries_Turalay.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc; Serdar Sayan (2001)

  • International commodity and capital flows provide channels for the transmission of the effects of demographic changes in large countries onto small open economies by altering the prices and interest rates facing them. This implies that even small countries with relatively young populations are potentially vulnerable to the effects of population aging in large industrial economies. To address this issue, which has largely been overlooked in previous literature, this paper considers the case of European Union and Turkey and shows, within an overlapping generations general equilibrium framework, that spillovers of the demographic shock in Europe would intensify the changes that Turkey wo...

  • Do_retail_gasoline_prices_rise_more_readily_than_they_fall_Turalay_Salim_Sel.pdf.jpg
  • Journal Article


  • Authors: Salim Al-Gudhea; Turalay Kenc; Sel Dibooglu (2007)

  • This paper revisits the controversy over whether retail gasoline prices respond to increases in upstream prices more rapidly than decreases. Using threshold and momentum models of cointegration and daily data at different stages in the distribution chain, we find that transmission between upstream and downstream prices is mostly asymmetric in the momentum model: increases in upstream prices are passed on to downstream prices more quickly than decreases. We distinguish between small and large shocks and show that the asymmetry is more pronounced for small shocks, which may be due to consumer search costs.

  • item.jpg
  • Journal Article


  • Authors: John Driffill; Turalay Kenc; Martin Sola; Fabio Spagnolo (2009)

  • We examine several discrete-time versions of the Cox, Ingersoll and Ross (CIR) model for the term structure, in which the short rate is subject to discrete shifts. Our empirical analysis suggests that careful consideration of which parameters of the short-term interest rate equation that are allowed to be switched is crucial. Ignoring this issue may result in a parameterization that produces no improvement (in terms of bond pricing) relative to the standard CIR model, even when there are clear breaks in the data.

  • Estimating_volatility_clustering_and_variance_risk_premium_effects_on_bank_default_indicators_Turalay_Emrah.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc (2021)

  • Default risk increases substantially during financial stress times due to mainly the two reasons: volatility clustering and investors' desire to protect themselves from such increases in volatility. It manifested in the aftermath of the Global Financial Crisis of 2008-2009 with unpleasant outcomes of many bankruptcies and severe financial distress. To account for these features, we adapted the structural credit risk approach to include both time-varying (return) volatility and risk premium about the return volatility itself. By applying the model to US banks, we obtain better bank default indicators in comparison to the benchmark models.

  • Financial_stress_and_economic_activity_in_some_emerging_Asian_economies_Turalay et al.pdf.jpg
  • Journal Article


  • Authors: Emrah I. Cevik; Sel Dibooglu; Turalay Kenc (2016)

  • This paper investigates episodes of financial stress and its relationship to economic activity in some Southeast Asian economies. To that end, we use a dynamic factor model to construct a financial stress index for Indonesia, South Korea, Malaysia, the Philippines, and Thailand and examine the relationship between financial stress and economic activity. Our financial stress index consists of riskiness in the banking sector, security market risk, currency risk, external debt and sovereign risk. Empirical results indicate that our financial stress index tracks recessions closely in the sample and impulse response functions suggest financial stress causes significant economic slowdowns.<...

  • item.jpg
  • Journal Article


  • Authors: Lynne Evans; Turalay Kenc (2004)

  • We compare actual and calibrated values for the foreign exchange risk premium based on the definition in [J. Int. Econ. 32 (1992) 305]. Calibrated values are found from within a dynamic stochastic general equilibrium model of a small open economy consisting of risk averse optimizing agents with unconventional preferences. We find that the equilibrium foreign exchange risk premium is a function of exogenous shocks in the model and is sensitive to assumed attitudes towards risk. Furthermore, various forms of policy uncertainty improve the capacity of the model to generate values closer to those found in the data.

  • Growth_and_welfare_effects_of_monetary_volatility_Turalay.pdf.jpg
  • Journal Article


  • Authors: Lynne Evans; Turalay Kenc (2001)

  • In this paper we use a continuous-time, stochastic, dynamic general equilibrium model to provide estimates of the growth and welfare effects of monetary volatility. Our primary concern is to highlight the long-run consequences of different monetary environments in a small open economy. Using UK-relevant data to set key parameter values in the model, we carry out three policy experiments. We find that (i) eliminating monetary growth shocks and (ii) reducing the infation rate can each generate positive growth and welfare effects, while (iii) reducing the interest rate depresses growth and is welfare deteriorating. However, these results are sensitive to the values set for the risk avers...

  • Inflation_and_sovereign_default_Turalay.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc; William Perraudin; Paolo Vitale (2001)

  • Recent research has highlighted the role that the government budget constraint plays in determining the consumer price level. According to the fiscal approach to price determination, prices adjust so that the discounted value of future real government primary surpluses equals the current real value of public debt. An important implication is that the probability of a crisis involving default on public debt may directly affect consumer prices. This paper examines the interaction of prices and sovereign insolvency crises using simple, continuous-time models of the government budget constraint.

  • The_influence_of_firms_financial_policy_on_tax_reform_Turalay.pdf.jpg
  • Journal Article


  • Authors: John P. Hutton; Turalay Kenc (1998)

  • The effectiveness of proposed reforms to the tax system intended to stimulate investment depends on how capital structure affects corporate behaviour. A dynamic general equilibrium model, calibrated for the UK, is used to investigate the difference between three models of financial structure, including one of endogenous structure motivated by agency theory. It is shown that the difference in predicted effects can be significant, and that the impact of the reform on the marginal source of funds is crucial.

  • International_banking_and_cross_border_effects_of_regulation_Turalay et al.pdf.jpg
  • Journal Article


  • Authors: Yusuf Soner Baskaya; Mahir Binici; Turalay Kenc (2017)

  • How do regulatory changes in a foreign country affect the lending growth in another country? This paper addresses this question using bank-level data from Turkey and macroprudential measures from fifty-six countries over a sample period of 2006-13. We offer evidence for the existence of the inward transmission of foreign prudential regulations by showing that the macroprudential tightening abroad leads to lending growth by the banks in Turkey. We find that domestic affiliates of foreign banks play a more prominent role in this transmission. We show that the existence and the magnitude spillovers differ across bank characteristics or the prudential instruments. Finally, our results ind...

  • Leverage, uncertainty and investment decisions_Turalay.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc; Ciaran Driver (2020)

  • We explore the role of taxes on stimulating investment decisions for levered firms under cashflows and investment costs uncertainty using the adjusted present value-based real options approach developed by Myers and Read (2019). We extend their work to consider combined tax credits and uncertain investment costs. We then run a numerical analysis to quantify the impact of uncertainty, corporate tax and investment tax credit in stimulating investments.

  • Measuring_financial_stress_in_Turkey_Turalay et al.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc (2013)

  • This study examines episodes of financial stress and develops a financial stress index for the Turkish economy for the 1997-2010 period. We consider various variables that summarize different aspects of financial conditions in the economy to gauge financial stress. We construct the index and show that financial stress affects economic activity significantly. Specifically, the index is a leading indicator of economic activity in Turkey. We then discuss how information provided by the financial stress index can be used to fine tune macroeconomic policy.

  • Real_options_with_priced_regime_switching_risk_Turalay et al.pdf.jpg
  • Journal Article


  • Authors: John Driffill; Turalay Kenc; Martin Sola (2013)

  • We develop a model of regime-switching risk premia as well as regime-dependent factor risk premia to price real options. The model incorporates the observation that the underlying risky income streams of real options are subject to discrete shifts over time as well as random changes. The presence of discrete shifts is due to systematic and unsystematic risk associated with changes in business cycles or in economic policy regimes or events such as takeovers, major changes in business plans. We analyze the impact of regime-switching behavior on the valuation of projects and investment opportunities. We find that accounting for Markov switching risk results in a delay in the expected tim...

  • The_spirit_of_capitalism_asset_pricing_and_growth_in_a_small_open_economy_Turalay_Sel.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc; Sel Dibooglu (2007)

  • Conventional models of economic behavior have failed to account for a number of observed empirical regularities in macroeconomics and international economics. This may be due to preference specifications in conventional models. In this paper, we consider preferences with the "spirit of capitalism" (the desire to accumulate wealth as a way of acquiring status). We analyze a number of potential effects of international catching-up and the spirit of capitalism on savings, growth, portfolio allocation and asset pricing. Moreover, we obtain a multi-factor Capital Asset Pricing Model (CAPM). Our results show that status concerns have non-trivial effects on savings, growth, portfolio allocat...

  • Taxation_risk-taking_and_growth_Turalay.pdf.jpg
  • Journal Article


  • Authors: Turalay Kenc (2004)

  • This paper investigates the equilibrium relationship between taxation, portfolio choice (risk-taking) and capital accumulation. Specifically, it examines how taxes affect risk-taking and capital accumulation. We extend the existing literature by relaxing two crucial assumptions in modelling risk-taking behavior: (i) that the investment opportunity set is fixed and (ii) that there is no distinction between attitudes towards risk and behavior towards intertemporal substitution. We extend the investment opportunity set of individuals through optimally determined human capital; and distinguish intertemporal substitution from attitudes towards risk via a recursive utility function. In the ...

  • Welfare_cost_of_inflation_in_a_stochastic_balanced_growth_model_Turalay_Sel.pdf.jpg
  • Journal Article


  • Authors: Sel Dibooglu; Turalay Kenc (2009)

  • There is a large and growing literature on the welfare cost of inflation. However, work in this area tend to find moderate estimates of welfare gains. In this paper we reexamine welfare costs of inflation within a stochastic general equilibrium balanced growth model paying a particular attention to recursive utility, portfolio balance effects, and monetary volatility and monetary policy uncertainty. Our numerical analysis shows that a monetary policy that brings down inflation to the optimum level can have substantial welfare effects. Portfolio adjustment effects seem to be the dominant factor behind the welfare gains.