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The monetary transmission mechanism in Turkey : New developments

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  • Erdem Basci
  • Ozgur Ozel
  • Cagri Sarikaya

Abstract

The objective of this paper is to study the changes in the monetary policy transmission mechanism in Turkey. The analysis hinges upon both qualitative and quantitative evidence regarding various channels of monetary policy transmission. The arguments about the extent of the exchange rate, interest rate, asset price, credit and expectations channel are based on various studies conducted especially in the aftermath of the February 2001 financial crisis. The paper asserts that the interest rate and the credit channel have an increasingly visible effect on economic activity, while the prominence of the exchange rate channel tends to attenuate in the post-crisis period thanks to prudent fiscal policies and the start of the inflation-targeting regime under floating exchange rates. Furthermore, the improvements in the communication policy increased the ability of the Central Bank of Turkey in managing expectations along with an enhanced credibility.

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Bibliographic Info

Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 0704.

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Date of creation: 2007
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Handle: RePEc:tcb:wpaper:0704

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  1. Michael Woodford, 2001. "The Taylor Rule and Optimal Monetary Policy," American Economic Review, American Economic Association, vol. 91(2), pages 232-237, May.
  2. Michael Woodford, 1999. "Optimal monetary policy inertia," Proceedings, Federal Reserve Bank of San Francisco.
  3. Calvo, Guillermo & Vegh, Carlos, 1992. "Currency Substitution in Developing Countries: An Introduction," MPRA Paper 20338, University Library of Munich, Germany.
  4. Mehtap Kesriyeli & Erdal Ozmen & Serkan Yigit, 2005. "Corporate Sector Debt Composition and Exchange Rate Balance Sheet Effect in Turkey," ERC Working Papers 0507, ERC - Economic Research Center, Middle East Technical University, revised Nov 2005.
  5. Halil Ibrahim Aydin, 2007. "Interest Rate Pass-Through in Turkey," Working Papers 0705, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  6. Bahmani-Oskooee, Mohsen & Kara, Orhan, 2000. "Exchange rate overshooting in Turkey," Economics Letters, Elsevier, vol. 68(1), pages 89-93, July.
  7. Hakan Kara & Hande Küçük-Tuger & Ümit Özlale & Burç Tuger & Eray M. Yücel, 2007. "Exchange Rate Regimes And Pass-Through: Evidence From The Turkish Economy," Contemporary Economic Policy, Western Economic Association International, vol. 25(2), pages 206-225, 04.
  8. 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.
  9. Julio J. Rotemberg & Michael Woodford, 1999. "Interest Rate Rules in an Estimated Sticky Price Model," NBER Chapters, in: Monetary Policy Rules, pages 57-126 National Bureau of Economic Research, Inc.
  10. Eduardo Morón & Diego Winkelried, 2003. "Monetary Policy Rules for Financially Vulnerable Economies," IMF Working Papers 03/39, International Monetary Fund.
  11. Woodford, Michael, 1999. "Optimal monetary policy inertia," CFS Working Paper Series 1999/09, Center for Financial Studies (CFS).
  12. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
  13. Fatih Ozatay, 2005. "Monetary Policy Challenges for Turkey in European Union Accession Process," Working Papers 0511, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
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Cited by:
  1. Kaya, Huseyin, 2013. "Forecasting the yield curve and the role of macroeconomic information in Turkey," Economic Modelling, Elsevier, vol. 33(C), pages 1-7.
  2. Kaya, Huseyin, 2013. "The yield curve and the macroeconomy: Evidence from Turkey," Economic Modelling, Elsevier, vol. 32(C), pages 100-107.
  3. James L. Butkiewicz & Zeliha Ozdogan, 2013. "Financial crisis, monetary policy reform and the monetary transmission mechanism in Turkey," Working Papers 13-08, University of Delaware, Department of Economics.
  4. Yüksel, Ebru & Metin-Ozcan, Kivilcim & Hatipoglu, Ozan, 2013. "A survey on time-varying parameter Taylor rule: A model modified with interest rate pass-through," Economic Systems, Elsevier, vol. 37(1), pages 122-134.
  5. Catik, A. Nazif & Karaçuka, Mehmet, 2011. "The bank lending channel in Turkey: Has it changed after the low inflation regime?," DICE Discussion Papers 32, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  6. Adnen Chockri & Ibticem Frihka, 2011. "La portée de la politique de ciblage d’inflation: Approche analytique et empirique pour le cas Tunisien," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(1), pages 91-111, March.
  7. Kose, Nezir & Emirmahmutoglu, Furkan & Aksoy, Sezgin, 2012. "The interest rate–inflation relationship under an inflation targeting regime: The case of Turkey," Journal of Asian Economics, Elsevier, vol. 23(4), pages 476-485.

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