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Effectiveness of the reserve option mechanism as a macroeconomic prudential tool: evidence from Turkey

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  • Afsin Sahin
  • Burak Dogan
  • Berument

Abstract

This article assesses the effectiveness of a novel macroprudential tool - the reserve option mechanism (ROM) - which Turkey's central bank developed during the post-2008 period and has employed to control the risk associated with excessive capital flows. We assess how capital flows have affected economic variable changes since the introduction and usage of the ROM. Empirical evidence gathered from Turkey suggests that the tool decreases the effect of capital flow on capital flow (positive shock to capital flow dies out faster or becomes less persistent) and diminishes the effects of capital flow shocks on exchange and interest rates.

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  • Afsin Sahin & Burak Dogan & Berument, 2015. "Effectiveness of the reserve option mechanism as a macroeconomic prudential tool: evidence from Turkey," Applied Economics, Taylor & Francis Journals, vol. 47(56), pages 6075-6087, December.
    • Handle: RePEc:taf:applec:v:47:y:2015:i:56:p:6075-6087
    DOI: 10.1080/00036846.2015.1064077
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    Cited by:

    1. Mahmut Çelik & Ayla Oğuş Binatlı, 2022. "How Effective Are Macroprudential Policy Instruments? Evidence from Turkey," Economies, MDPI, vol. 10(4), pages 1-17, March.
    2. Serdar Varlik & M. Hakan Berument, 2020. "Monetary policy under a multiple‐tool environment," Bulletin of Economic Research, Wiley Blackwell, vol. 72(3), pages 225-250, July.

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