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Identifying the Liquidity Effects of Monetary Policy Shocks For a Small Open Economy: Turkey

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  • Berument, Hakan
  • Togay, Selahattin
  • Sahin, Afsin

Abstract

This paper proposes a new liquidity measure for a small open economy. The new measure includes the net liquidity provided to the system by a central bank after accounting for the central bank’s involvement in the foreign exchange market. Empirical evidence gathered from Turkey suggests that a positive innovation in liquidity increases output temporarily and that its effect on prices, exchange rate and money are permanently higher.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 46883.

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Date of creation: Sep 2011
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Publication status: Published in Open Economies Review 4.22(2011): pp. 649-667
Handle: RePEc:pra:mprapa:46883

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Keywords: Liquidity effect; Small and open economies; VAR models.;

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References

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Cited by:
  1. Hakan M. Berument & Zulal S Denaux & Yeliz Yalcin, 2012. "How does the Exchange Rate Movement Affect Macroeconomic Performance? A VAR Analysis with Sign Restriction Approach– Evidence from Turkey," Economics Bulletin, AccessEcon, vol. 32(1), pages 295-305.

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