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How do banks' stock returns respond to monetary policy committee announcements in Turkey? Evidence from traditional versus new monetary policy episodes


  • Küçükkocaoğlu, Güray
  • Ünalmış, Deren
  • Ünalmış, İbrahim


Using a methodology that is robust to endogeneity and omitted variable problems, it is found that the stock returns of all banks that are listed in Borsa Istanbul (BIST) respond significantly to the monetary policy surprises on Monetary Policy Committee (MPC) meeting days prior to May 2010. It is also shown that stock returns of banks for which interest payments constitute an important share in their balance sheets respond more aggressively to the changes in policy rates. In addition, foreign banks and participation banks give relatively less responses to monetary policy surprises. Finally, the estimation results suggest that since the Central Bank of the Republic of Turkey has started adopting a new monetary policy framework in May 2010, with various instruments and flexible timing, aggregate and individual bank indices have not responded significantly to the surprises on MPC meeting days.

Suggested Citation

  • Küçükkocaoğlu, Güray & Ünalmış, Deren & Ünalmış, İbrahim, 2013. "How do banks' stock returns respond to monetary policy committee announcements in Turkey? Evidence from traditional versus new monetary policy episodes," Economic Modelling, Elsevier, vol. 35(C), pages 536-545.
  • Handle: RePEc:eee:ecmode:v:35:y:2013:i:c:p:536-545 DOI: 10.1016/j.econmod.2013.07.019

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    References listed on IDEAS

    1. Duran, Murat & Özcan, Gülserim & Özlü, Pınar & Ünalmış, Deren, 2012. "Measuring the impact of monetary policy on asset prices in Turkey," Economics Letters, Elsevier, vol. 114(1), pages 29-31.
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    More about this item


    Monetary policy; Stock market; Banking system; Emerging markets; Identification through heteroscedasticity;

    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


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