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The Interest Rate Channel in Turkey: An Investigation with Kalman Filter Approach

Author

Listed:
  • Taha Bahadir Sarac

    (Department of Economics,Faculty of Economics and Administrative Sciences, Nigde University, Turkey)

  • OkYAY Ucan

    (Department of Economics,Faculty of Economics and Administrative Sciences, Nigde University, Turkey)

Abstract

The monetary authority affects the aggregate demand and investment expenditure via controlling short run interest rates. It is important to satisfy the price stability together with working interest rate channel. This study aims to investigate the validity of interest rate channel in Turkey since the inflation targeting period starting with the year 2002. The sample period covers quarterly data from 1990:1 to 2011:3. It is stated that after the 2002 efficiency of interest rate channel increases.

Suggested Citation

  • Taha Bahadir Sarac & OkYAY Ucan, 2013. "The Interest Rate Channel in Turkey: An Investigation with Kalman Filter Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 3(4), pages 874-884.
  • Handle: RePEc:eco:journ1:2013-04-9
    as

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    References listed on IDEAS

    as
    1. Apostoaie Constantin Marius & Roman Angela, 2010. "The Particularities Of The Monetary Policy Transmission Mechanism In Romania," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(2), pages 658-664, December.
    2. Peersman, Gert & Smets, Frank, 2001. "The monetary transmission mechanism in the euro area: more evidence from VAR analysis," Working Paper Series 0091, European Central Bank.
    3. Paxil Butzen & Catherine Fuss & Philip Vermeulen, 2002. "The interest rate and crédit channels in Belgium: an investigation with micro-level firm data," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 45(3), pages 5-36.
    4. Sanchita Mukherjee & Rina Bhattacharya, 2011. "Inflation Targeting and Monetary Policy Transmission Mechanisms in Emerging Market Economies," IMF Working Papers 11/229, International Monetary Fund.
    5. Goldfeld, Stephen M. & Quandt, Richard E., 1973. "A Markov model for switching regressions," Journal of Econometrics, Elsevier, vol. 1(1), pages 3-15, March.
    6. Markus Demary, 2010. "The interplay between output, inflation, interest rates and house prices: international evidence," Journal of Property Research, Taylor & Francis Journals, vol. 27(1), pages 1-17, April.
    7. Abdulnasser Hatemi-J & Manuchehr Irandoust, 2008. "The Fisher effect: a Kalman filter approach to detecting structural change," Applied Economics Letters, Taylor & Francis Journals, vol. 15(8), pages 619-624.
    8. Stephanos Papadamou & Georgios Oikonomou, 2007. "The Monetary Transmission Mechanism: Evidence from Eight Economies in Transition," International Economic Journal, Taylor & Francis Journals, vol. 21(4), pages 559-576.
    9. Frederic S. Mishkin, 1995. "Symposium on the Monetary Transmission Mechanism," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 3-10, Fall.
    10. Claus, Iris, 2011. "Inside the black box: How important is the credit channel relative to the interest and exchange rate channels?," Economic Modelling, Elsevier, vol. 28(1-2), pages 1-12, January.
    11. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867–1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Kalman Filter; Markov Switching; Monetary Policy; Turkey;

    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
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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