Advanced Search
MyIDEAS: Login to save this paper or follow this series

Measuring the Impact of Monetary Policy on Asset Prices in Turkey (Turkiye’de Para Politikasinin Finansal Varlik Fiyatlari Uzerine Etkisi)

Contents:

Author Info

  • Murat Duran
  • Gulserim Ozcan
  • Pinar Ozlu
  • Deren Unalmis

Abstract

The transmission of policy decisions to financial markets is an integral part of the monetary transmission mechanism. However, one of the major problems in estimating the effect of monetary policy on asset prices is the simultaneous response of policy actions and the asset prices to each other. Rigobon and Sack (2004) suggest a heterokedasticity-based generalized method of moments (GMM) technique to overcome this problem. For emerging markets, there are very few studies using this method. This study applies the heteroskedasticity-based technique to estimate the impact of monetary policy on the Turkish bond, currency and stock markets. This technique also addresses the omitted variables problem. The empirical results verify the findings obtained by event study methods in earlier studies. Firstly, the impact of monetary policy on market interest rates is found to be positive, which diminishes with maturity for maturities longer than 9 months. Secondly, the results suggest that a rise in the policy rate leads to a moderate appreciation of the domestic currency, where the TL/EUR rate is affected more significantly compared to the TL/US dollar rate. Finally, the results show that an increase in the policy rate leads to a decline in stock prices, and monetary policy has the greatest impact on the share prices of the financial sector firms.

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.tcmb.gov.tr/research/teblig/abstract/wp1017_tr.php
Download Restriction: no

Bibliographic Info

Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 1017.

as in new window
Length:
Date of creation: 2010
Date of revision:
Handle: RePEc:tcb:wpaper:1017

Contact details of provider:
Postal: Head Office, Istiklal Cad. 10 Ulus, 06100 Ankara
Phone: (90 312) 507 5000
Fax: (90 312) 507 5640
Email:
Web page: http://www.tcmb.gov.tr
More information through EDIRC

Related research

Keywords: Monetary Policy; Asset Prices; Identification through Heteroskedasticity;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

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. Rigobon, Roberto & Sack, Brian, 2004. "The impact of monetary policy on asset prices," Journal of Monetary Economics, Elsevier, Elsevier, vol. 51(8), pages 1553-1575, November.
  2. Kholodilin, Konstantin & Montagnoli, Alberto & Napolitano, Oreste & Siliverstovs, Boriss, 2009. "Assessing the impact of the ECB's monetary policy on the stock markets: A sectoral view," Economics Letters, Elsevier, Elsevier, vol. 105(3), pages 211-213, December.
  3. Ben S. Bernanke & Kenneth N. Kuttner, 2003. "What explains the stock market's reaction to Federal Reserve policy?," Staff Reports, Federal Reserve Bank of New York 174, Federal Reserve Bank of New York.
  4. Zelal AKTAŞ & Harun ALP & Refet GÜRKAYNAK & Mehtap KESRİYELİ & Musa ORAK, 2009. "Türkiye'de para politikasının aktarımı: Para politikasının mali piyasalara etkisi," Iktisat Isletme ve Finans, Bilgesel Yayincilik, Bilgesel Yayincilik, vol. 24(278), pages 9-24.
  5. Martin T. Bohl & Pierre L. Siklos & David Sondermann, 2008. "European Stock Markets and the ECB's Monetary Policy Surprises," International Finance, Wiley Blackwell, Wiley Blackwell, vol. 11(2), pages 117-130, 08.
  6. Refet Gürkaynak & Brian Sack & Eric Swanson, 2004. "Do actions speak louder than words? the response of asset prices to monetary policy actions and statements," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2004-66, Board of Governors of the Federal Reserve System (U.S.).
  7. Kuttner, Kenneth N., 2001. "Monetary policy surprises and interest rates: Evidence from the Fed funds futures market," Journal of Monetary Economics, Elsevier, Elsevier, vol. 47(3), pages 523-544, June.
  8. András Rezessy, 2005. "Estimating the immediate impact of monetary policy shocks on the exchange rate and other asset prices in Hungary," MNB Occasional Papers, Magyar Nemzeti Bank (the central bank of Hungary) 2005/38, Magyar Nemzeti Bank (the central bank of Hungary).
  9. Michael Ehrmann & Marcel Fratzscher & Roberto Rigobon, 2011. "Stocks, bonds, money markets and exchange rates: measuring international financial transmission," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 26(6), pages 948-974, 09.
  10. Guimarães, Bernardo & Soares Gonçalves, Carlos Eduardo, 2007. "Monetary Policy, Default Risk and the Exchange Rate," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6501, C.E.P.R. Discussion Papers.
  11. Pinar Ozlu & Cihan Yalcin, 2010. "The Trade Credit Channel of Monetary Policy Transmission: Evidence from Non-Financial Firms in Turkey (Firma Ticari Borclari ve Kredi Aktarim Mekanizmasi: Turkiye Ornegi)," Working Papers, Research and Monetary Policy Department, Central Bank of the Republic of Turkey 1016, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  12. Tore Ellingsen & Ulf Soderstrom, 2001. "Monetary Policy and Market Interest Rates," American Economic Review, American Economic Association, American Economic Association, vol. 91(5), pages 1594-1607, December.
  13. Pinar Ozlu & Cihan Yalcin, 2010. "Kuresel Firma Ticari Borclari ve Kredi Aktarim Mekanizmasi," CBT Research Notes in Economics, Research and Monetary Policy Department, Central Bank of the Republic of Turkey 1004, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  14. Murat Duran & Pinar Ozlu & Deren Unalmis, 2010. "TCMB Faiz Kararlarinin Hisse Senedi Piyasalari Uzerine Etkisi," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 10(2), pages 23-32.
  15. Roberto Rigobon, 2003. "Identification Through Heteroskedasticity," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 777-792, November.
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:tcb:wpaper:1017. 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: (Gulhanim Kayatas).

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.