According to the Big Mac Index, Turkish Lira appears to be 25% overvalued against the US dollar. However, the Big Macs I had in Turkey were much better than the Big Macs I had in US; also the Turkish restaurants were much cleaner and had a positive image compared to the US restaurants. I don't know whether the Turkish lira is really overvalued or not.
If Turkish lira is overvalued, then Turkish companies should be acquiring US companies because of the discount provided by the "overvalued" Turkish currency. They should at least pay back their foreign debt by using overvalued currency. I don't see many signs of that though. Considering that Turkish companies do not invest much in R&D, this provides a perfect opportunity for Turkish companies to acquire high tech US companies cheaply. When we take a look at Turkey's exports, we would notice that it has been increasing by leaps and bounds in the past 6 years. You would not see 20+% increases in export performance if your currency is overvalued and appreciates even further. We are exposed to "Turkish lira overvaluation" statements not because Turkey in general has a real problem with the currency's valuation but because the textile industry has significant problems. Textile industry had been the top exporter of the countyr until recently but they have been experiencing significant competition from more competitive countries such as China. The appreciation of Turkish lira also did not help much either. That's why textile industry lobbyists have been pushing the government to appreciate the currency to alleviate (or postpone) their problems for a couple of years. This is the real issue here. So far, the government was not willing to depreciate the currency mostly because they don't want to pay higher prices for energy imports and they want to fight inflation. Textile industry is preparing for another push in the coming days though. We will see how this will effect the exchange rate policy.
