Advanced Search
MyIDEAS: Login to save this article or follow this journal

The yield curve and the macroeconomy: Evidence from Turkey

Contents:

Author Info

  • Kaya, Huseyin

Abstract

This paper contributes to the literature on the relationship between the yield curve and macroeconomic variables by focusing on an emerging market case: Turkey. The most important result of the paper is that the relationship between the yield curve and macroeconomic variables is significantly affected by the change in monetary policy which is associated with the implementation of inflation targeting (IT) regime. While before the IT regime the yield curve is affected to some extent by macroeconomic variables, after the IT regime, it is mainly driven by macroeconomic variables. We also find that central bank has gained ability to affect the entire yield curve with the IT regime. The other important result is that in addition to inflation and real activities, the exchange rates also play an important role in the yield curve dynamics in Turkey.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/pii/S026499931300045X
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 32 (2013)
Issue (Month): C ()
Pages: 100-107

as in new window
Handle: RePEc:eee:ecmode:v:32:y:2013:i:c:p:100-107

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: Term structure; Yield curve; Monetary policy; Macroeconomics;

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Diebold, Francis X. & Piazzesi, Monica & Rudebusch, Glenn D., 2005. "Modeling bond yields in finance and macroeconomics," CFS Working Paper Series 2005/03, Center for Financial Studies (CFS).
  2. Smith, Josephine M. & Taylor, John B., 2009. "The term structure of policy rules," Journal of Monetary Economics, Elsevier, Elsevier, vol. 56(7), pages 907-917, October.
  3. Diebold, Francis X. & Li, Canlin, 2006. "Forecasting the term structure of government bond yields," Journal of Econometrics, Elsevier, Elsevier, vol. 130(2), pages 337-364, February.
  4. Ang, Andrew & Piazzesi, Monika, 2003. "A no-arbitrage vector autoregression of term structure dynamics with macroeconomic and latent variables," Journal of Monetary Economics, Elsevier, Elsevier, vol. 50(4), pages 745-787, May.
  5. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 39(1), pages 195-214, December.
  6. Hans Dewachter, 2004. "Macro factors and the term structure of interest rates," Money Macro and Finance (MMF) Research Group Conference 2003 25, Money Macro and Finance Research Group.
  7. Dibooglu, Sel & Kibritcioglu, Aykut, 2004. "Inflation, output growth, and stabilization in Turkey, 1980-2002," Journal of Economics and Business, Elsevier, Elsevier, vol. 56(1), pages 43-61.
  8. Hakan Berument & Asli Günay, 2003. "Exchange Rate Risk and Interest Rate: A Case Study for Turkey," Open Economies Review, Springer, Springer, vol. 14(1), pages 19-27, January.
  9. Frederic S. Mishkin, 1988. "What Does the Term Structure Tell Us About Future Inflation?," NBER Working Papers 2626, National Bureau of Economic Research, Inc.
  10. Oya Celasun & R. Gaston Gelos & Alessandro Prati, 2004. "Would "Cold Turkey" Work in Turkey?," IMF Staff Papers, Palgrave Macmillan, vol. 51(3), pages 493-509, November.
  11. Erdem Basci & Ozgur Ozel & Cagri Sarikaya, 2007. "The monetary transmission mechanism in Turkey : New developments," Working Papers 0704, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  12. Cox, John C & Ingersoll, Jonathan E, Jr & Ross, Stephen A, 1985. "A Theory of the Term Structure of Interest Rates," Econometrica, Econometric Society, Econometric Society, vol. 53(2), pages 385-407, March.
  13. Tao Wu & Glenn Rudebusch, 2004. "A Macro-Finance Model of the Term Structure, Monetary Policy, and the Economy," 2004 Meeting Papers 104, Society for Economic Dynamics.
  14. James H. Stock & Mark W. Watson, 2001. "Forecasting Output and Inflation: The Role of Asset Prices," NBER Working Papers 8180, National Bureau of Economic Research, Inc.
  15. Telatar, Erdinc & Telatar, Funda & Ratti, Ronald A., 2003. "On the predictive power of the term structure of interest rates for future inflation changes in the presence of political instability: the Turkish economy," Journal of Policy Modeling, Elsevier, Elsevier, vol. 25(9), pages 931-946, December.
  16. Qiang Dai & Kenneth J. Singleton, 2000. "Specification Analysis of Affine Term Structure Models," Journal of Finance, American Finance Association, American Finance Association, vol. 55(5), pages 1943-1978, October.
  17. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
  18. Nelson, Charles R & Siegel, Andrew F, 1987. "Parsimonious Modeling of Yield Curves," The Journal of Business, University of Chicago Press, vol. 60(4), pages 473-89, October.
  19. Ben S. Bernanke & Vincent R. Reinhart & Brian P. Sack, 2004. "Monetary Policy Alternatives at the Zero Bound: An Empirical Assessment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(2), pages 1-100.
  20. Kozicki, Sharon & Tinsley, P. A., 2001. "Shifting endpoints in the term structure of interest rates," Journal of Monetary Economics, Elsevier, Elsevier, vol. 47(3), pages 613-652, June.
  21. Diebold, Francis X. & Rudebusch, Glenn D. & Borag[caron]an Aruoba, S., 2006. "The macroeconomy and the yield curve: a dynamic latent factor approach," Journal of Econometrics, Elsevier, Elsevier, vol. 131(1-2), pages 309-338.
  22. Arturo Estrella, 2005. "Why Does the Yield Curve Predict Output and Inflation?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(505), pages 722-744, 07.
  23. Tao Wu, 2001. "Monetary policy and the slope factor in empirical term structure estimations," Working Paper Series 2002-07, Federal Reserve Bank of San Francisco.
  24. Ravi Bansal & Hao Zhou, 2001. "Term structure of interest rates with regime shifts," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2001-46, Board of Governors of the Federal Reserve System (U.S.).
  25. Vasicek, Oldrich Alfonso, 1977. "Abstract: An Equilibrium Characterization of the Term Structure," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 12(04), pages 627-627, November.
  26. Glenn D. Rudebusch, 2010. "Macro-Finance Models Of Interest Rates And The Economy," Manchester School, University of Manchester, vol. 78(s1), pages 25-52, 09.
  27. Vasicek, Oldrich, 1977. "An equilibrium characterization of the term structure," Journal of Financial Economics, Elsevier, Elsevier, vol. 5(2), pages 177-188, November.
  28. Hordahl, Peter & Tristani, Oreste & Vestin, David, 2006. "A joint econometric model of macroeconomic and term-structure dynamics," Journal of Econometrics, Elsevier, Elsevier, vol. 131(1-2), pages 405-444.
  29. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fear of Floating," NBER Working Papers 7993, National Bureau of Economic Research, Inc.
  30. Civcir, Irfan & Akçaglayan, AnIl, 2010. "Inflation targeting and the exchange rate: Does it matter in Turkey?," Journal of Policy Modeling, Elsevier, Elsevier, vol. 32(3), pages 339-354, May.
  31. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1908, C.E.P.R. Discussion Papers.
  32. Huseyin Kaya & M. Ege Yazgan, 2011. "Has 'inflation targeting' increased the predictive power of term structure about future inflation: evidence from Turkish experience?," Applied Financial Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 21(20), pages 1539-1547.
  33. Darrell Duffie & Rui Kan, 1996. "A Yield-Factor Model Of Interest Rates," Mathematical Finance, Wiley Blackwell, Wiley Blackwell, vol. 6(4), pages 379-406.
  34. Emanuel Moench, 2012. "Term structure surprises: the predictive content of curvature, level, and slope," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(4), pages 574-602, 06.
  35. Estrella, Arturo & Mishkin, Frederic S., 1997. "The predictive power of the term structure of interest rates in Europe and the United States: Implications for the European Central Bank," European Economic Review, Elsevier, Elsevier, vol. 41(7), pages 1375-1401, July.
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:32:y:2013:i:c:p:100-107. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.