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Monetary Policy after the Global Crisis

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  • A. Kara

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Abstract

Post-crisis spillovers and heightened capital flows have triggered a search for alternative monetary policy frameworks, especially for small open emerging economies. The Turkish experience since the end of 2010 is an interesting case in this respect. Faced with extreme volatility in cross-border capital flows, rapid credit growth, and a sharp deterioration in the current account deficit, the Central Bank of Turkey (CBT) has modified the conventional inflation targeting regime by adopting financial stability as a supplementary objective and enriching the set of policy instruments. This study explains the underlying motivation behind why the CBT adopted such a flexible policy, provides an overview of the new framework, and summarizes the initial results. The analysis conducted throughout the paper and the recent evidence suggests that the new policy framework has been quite effective in engineering a soft landing of the Turkish economy in the sense that it has successfully shifted the composition of aggregate demand towards a more balanced growth path (rebalancing) without prejudice to the price stability objective. Copyright International Atlantic Economic Society 2013

Suggested Citation

  • A. Kara, 2013. "Monetary Policy after the Global Crisis," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 41(1), pages 51-74, March.
  • Handle: RePEc:kap:atlecj:v:41:y:2013:i:1:p:51-74 DOI: 10.1007/s11293-012-9358-7
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    References listed on IDEAS

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    1. Hakan Kara & Fethi Ogunc, 2011. "Doviz Kuru ve Ithalat Fiyatlarinin Enflasyona Etkisi," CBT Research Notes in Economics 1114, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
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    8. Erdem Başçı & Hakan Kara, 2011. "Finansal istikrar ve para politikası," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 26(302), pages 9-25.
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    Citations

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    Cited by:

    1. Hakan Kara, 2016. "A brief assessment of Turkey's macroprudential policy approach : 2011–2015," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 16(3), pages 85-92.
    2. Yeldan A. Erinc & Kolsuz Gunes & Unuvar Burcu, 2014. "What to Smooth: Rate of Interest or the Foreign Exchange? Turkish Monetary Policy under Turbulent Times," Review of Middle East Economics and Finance, De Gruyter, vol. 10(3), pages 1-15, December.
    3. Koray Alper & Mahir Binici & Selva Demiralp & Hakan Kara & Pinar Ozlu, 2014. "Reserve Requirements, Liquidity Risk, and Credit Growth," Koç University-TUSIAD Economic Research Forum Working Papers 1416, Koc University-TUSIAD Economic Research Forum.
    4. Ahmet Benlialper & Hasan Comert, 2015. "Global Constraints on Central Banking:The case of Turkey," Working papers wpaper111, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    5. Fatih Ozatay, 2013. "Turkey's Distressing Dance with Capital Flows," Working Papers 1306, TOBB University of Economics and Technology, Department of Economics, revised Oct 2013.
    6. Hakan Kara, 2016. "Turkey's experience with macroprudential policy," BIS Papers chapters,in: Bank for International Settlements (ed.), Macroprudential policy, volume 86, pages 123-139 Bank for International Settlements.

    More about this item

    Keywords

    Monetary policy; Price stability; Financial stability; Capital flows; Monetary transmission mechanism; Macro-prudential policy; E44; E52; E58;

    JEL classification:

    • 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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