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The Conduct of Monetary Policy in Turkey in the Pre- and Post-crisis Period of 2001 in Comparative Perspective: a Case for Central Bank Independence

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  • Alper, Emre
  • Hatipoglu, Ozan

Abstract

We document the role of independence for Central Bank of Republic of Turkey (CBRT) as it matters to successful implementation of monetary policy. We compare the implementation of monetary policy pre- and post-crisis periods within an empirical framework which allows us to measure the role of independence quantitatively. We estimate a Taylor rule with time varying coefficients by employing a dual extended Kalman filter. We find that the coefficient of inflation gap has increased substantially since CBRT gained de-juro independence.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 18426.

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Date of creation: Jan 2009
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Handle: RePEc:pra:mprapa:18426

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Keywords: Taylor Rule; Kalman Filter; Monetary Policy;

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  1. Eva Gutierrez, 2003. "Inflation Performance and Constitutional Central Bank Independence," IMF Working Papers 03/53, International Monetary Fund.
  2. C. Emre Alper & Ziya Onis, 2003. "Financial Globalization, the Democratic Deficit, and Recurrent Crises in Emerging Markets : The Turkish Experience in the Aftermath of Capital Account Liberalization," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 39(3), pages 5-26, May.
  3. Posen, Adam, 1998. "Central Bank Independence and Disinflationary Credibility: A Missing Link?," Oxford Economic Papers, Oxford University Press, vol. 50(3), pages 335-59, July.
  4. Guy Debelle & Stanley Fischer, 1994. "How independent should a central bank be?," Working Papers in Applied Economic Theory 94-05, Federal Reserve Bank of San Francisco.
  5. Miguel A. Savastano & Paul R. Masson & Sunil Sharma, 1997. "The Scope for Inflation Targeting in Developing Countries," IMF Working Papers 97/130, International Monetary Fund.
  6. Richard Clarida & Jordi Gali & Mark Gertler, 1997. "Monetary Policy Rules in Practice: Some International Evidence," NBER Working Papers 6254, National Bureau of Economic Research, Inc.
  7. Olivier Blanchard, 2004. "Fiscal Dominance and Inflation Targeting: Lessons from Brazil," NBER Working Papers 10389, National Bureau of Economic Research, Inc.
  8. C. Emre Alper, Ismail Saglam, 2001. "The Transmission of a Sudden Capital Outflow: Evidence from Turkey," Eastern European Economics, M.E. Sharpe, Inc., vol. 39(2), pages 29-48, March.
  9. Cukierman, Alex & Webb, Steven B & Neyapti, Bilin, 1992. "Measuring the Independence of Central Banks and Its Effect on Policy Outcomes," World Bank Economic Review, World Bank Group, vol. 6(3), pages 353-98, September.
  10. Hasan Ersel & Fatih Özatay, 2008. "Fiscal Dominance and Inflation Targeting: Lessons from Turkey," Emerging Markets Finance and Trade, M.E. Sharpe, Inc., vol. 44(6), pages 38-51, November.
  11. Oya Pınar Ardıc & Faruk Selcuk, 2006. "The dynamics of a newly floating exchange rate: the Turkish case," Applied Economics, Taylor & Francis Journals, vol. 38(8), pages 931-941.
  12. Hakan Kara & Fethi Ogunc, 2005. "Exchange Rate Pass-Through in Turkey : It is Slow, but is it Really Low?," Working Papers 0510, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  13. Bahmani-Oskooee, Mohsen & Kara, Orhan, 2000. "Exchange rate overshooting in Turkey," Economics Letters, Elsevier, vol. 68(1), pages 89-93, July.
  14. Alex Cukierman, 1993. "Central Bank Independence, Political Influence and Macroeconomic Performance: a Survey of Recent Development," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 30(91), pages 271-292.
  15. Aykut Kibritcioglu, 2004. "A Short Review of the Long History of Turkish High Inflation," Macroeconomics 0404003, EconWPA.
  16. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
  17. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1, May.
  18. Ali Hakan Kara, 2006. "Turkish Experience With Implicit Inflation Targeting," Working Papers 0603, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  19. Charles T. Carlstrom & Timothy S. Fuerst, 2007. "Inertial Taylor rules: the benefit of signaling future policy," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Apr.
  20. Jean-François Segalotto & Marco Arnone & Bernard Laurens, 2006. "Measures of Central Bank Autonomy," IMF Working Papers 06/228, International Monetary Fund.
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