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Revisiting of Interest Rate Channel: Nonlinear transmission of Monetary Policy Shocks to the Turkish Economy

Author

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  • Durmus Cagri Yildirim

    (Namik Kemal University, Tekirdag, Turkey)

  • Tugba Turan

    (Namik Kemal University, Tekirdag, Turkey)

Abstract

This study examines the effectiveness of non-linear monetary policy interest rate channel shocks for the Turkish economy using the threshold VAR analysis in the period of 2006-2019. The interest channel is examined with the two models for both consumption transfer and investment transfer models. The results show that the interest rate channel is effective in the high regime (high macroeconomic instability) for the consumption transfer model, and it is partially effective in the low regime (low macroeconomic instability). On the other hand, for the model with investment expenditures flow, the interest rate channel is partially effective in both high and low regimes.

Suggested Citation

  • Durmus Cagri Yildirim & Tugba Turan, 2023. "Revisiting of Interest Rate Channel: Nonlinear transmission of Monetary Policy Shocks to the Turkish Economy," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 12(1), pages 199-223.
    • Handle: RePEc:cbk:journl:v:12:y:2023:i:1:p:199-223
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    More about this item

    Keywords

    Turkish Economy; Monetary Policy Shocks; Nonlinear transmission; Interest Rate Channel.;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • 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
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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