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Interest Rate Pass-Through and Monetary Transmission Mechanism in Turkey

Author

Listed:
  • Mortaza OJAGHLOU

    (Assistant Professor, Istanbul Aydin University, Faculty of Economics and Administrative Sciences, mortazaojaghlou@aydin.edu.tr,)

  • Begum KAYA SOZTANACI

    (Master Student, Istanbul Aydin University, Faculty of Economics and Administrative Sciences, begumkayasoztanaci@stu.aydin.edu.tr)

Abstract

This paper examines the pass-through of interest rates from changes in the official interest rate of the Central Bank of Turkey (CBRT) to market interest rates in Turkey. In this context, we have collected six market interest rates series, such as the bank rate (BR), the lending rate (LR), the deposit rate (DR), the money market rate (MMR), the Treasury bill rate (TBR), and the government bond yield (GBY). First, we conducted an analysis of the correlation of the series. Second, we examined the cointegration of the series and then used Bayesian vector autoregression to estimate the response of interest rates to the bank rate. The results show that there is a long-run relationship between the interest rates and that there is a strong correlation between the bank rate and the third rates such as the money market rate, the deposit rate (DR) and the lending rate. There is a complete pass-through between the bank rate and the landing rate. There is a strong pass-through between the money market rate and the bank rate, and a strong pass-through between the Treasury bill rate, the deposit rate, and the bank rate. There is no pass-through between the government bond yield and the bank rate.

Suggested Citation

  • Mortaza OJAGHLOU & Begum KAYA SOZTANACI, 2022. "Interest Rate Pass-Through and Monetary Transmission Mechanism in Turkey," Isletme ve Iktisat Calismalari Dergisi, Econjournals, vol. 10(1), pages 46-54.
    • Handle: RePEc:eco:journ4:2022-01-04
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    References listed on IDEAS

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    Cited by:

    1. Jackson, Emerson Abraham & Barrie, Mohamed Samba & Tamuke, Edmund, 2023. "Effectiveness of the Interest Rate Channel of Monetary Policy Transmission Mechanism in Sierra Leone," MPRA Paper 117478, University Library of Munich, Germany, revised 06 May 2023.

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    Keywords

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    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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

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