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One Policy Rate, Different Sectoral Responses: Evidence on the Monetary Transmission Mechanism in Türkiye

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  • Ufuk Can
  • Harun Bal

Abstract

This paper examines the sectoral monetary transmission mechanism in Türkiye during the inflation-targeting period. Using quarterly data for 2006Q1–2018Q2, it estimates VAR models for the agriculture, industry, construction, and services sectors. The empirical framework includes sectoral output, sectoral producer prices, sectoral credit, sectoral stock market indices, the effective policy rate, and the nominal exchange rate. Impulse response functions and forecast error variance decompositions assess the dynamic effects of monetary policy shocks and the relative importance of transmission channels. The findings show that monetary policy affects both sectoral output and prices, but the magnitude and timing of responses vary across sectors. The exchange rate channel is the most influential mechanism, particularly for sectoral price dynamics, while the interest rate channel is especially relevant for construction and services output. These results indicate that monetary policy in Türkiye is not sectorally neutral and that aggregate analyses may conceal important heterogeneity across production sectors.

Suggested Citation

  • Ufuk Can & Harun Bal, 2026. "One Policy Rate, Different Sectoral Responses: Evidence on the Monetary Transmission Mechanism in Türkiye," Journal of Research in Economics, Politics & Finance, Ersan ERSOY, vol. 11(2), pages 769-788.
    • Handle: RePEc:ahs:journl:v:11:y:2026:i:2:p:769-788
    DOI: 10.30784/epfad.1953772
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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