Dollarization is defined as the use of a foreign currency in a particular economy instead of, or in combination with, the national currency. Dollarization, which emerged as a natural consequence of increasing globalization and liberalization in capital markets, is an interesting topic for both academics and policymakers due to its significant effects on economies. Although the reasons for the emergence of dollarization may differ across countries, there is a consensus in the literature that the main factors causing dollarization are economic, political and structural instabilities. In this respect, although Turkey's dollarization story started in the early 1970s, the financial liberalization steps taken in the 1990s and the macroeconomic and structural instabilities caused the dollarization process in Turkey to show serious excesses. The climate of confidence that emerged because of the steps taken after the two economic crises in the early 2000s led to improvements in economic and structural indicators, thus initiating a process of reverse dollarization for Turkey. However, the de-dollarization process in Turkey only lasted until the early 2010s. As of the 2010s, an increase in the trend of unofficial dollarization is again observed for Turkey. The pandemic that emerged along with the economic and institutional instabilities experienced during this period caused dollarization rates in Turkey to follow a high course again. The aim of this study is to explain the dollarization story of Turkey by considering the dollarization concept in detail, and to examine the relationship between the partial dollarization process, which increased especially after 2010, with macroeconomic and institutional factors, with a qualitative research design. Since the dollarization process in Turkey has taken place in different directions in certain periods, this study examines the dollarization process in Turkey and the interaction of dollarization with economic and institutional indicators separately for the periods 1980-2001, 2001-2010 and 2010-2022.
Key words: Dollarization, Institutions, Inflation, Exchange Rate. JEL Codes: E44, E50 Article Language: EnglishTurkish
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