IDEAS home Printed from https://ideas.repec.org/p/fes/wpaper/wpaper111.html
   My bibliography  Save this paper

Global Constraints on Central Banking:The case of Turkey

Author

Listed:
  • Ahmet Benlialper

    (Ipek University)

  • Hasan Comert

    (Middle East Technical University)

Abstract

This study aims to evaluate the developments in Turkish monetary policy after 2002 and understand constraints on the effectiveness of The Turkish Central Bank (CBRT). The CBRT has significantly altered its monetary policy in response to the crisis. It became much more experimental and aware of challenges it faced. However, the Bank’s ability to exert influence on key variables seems to have been restrained by factors outside of its control. Financial flows exert great influence on key macroeconomic variables the Bank monitors closely. Furthermore, energy prices are among the key determinants of inflation in Turkey. As a result, the Bank’s influence on growth and inflation through intermediate variables became a daunting task. The magnitude and direction of flows seem to be mainly related to global risk perception determining the worldwide liquidity conditions rather than domestic factors. Under these conditions central banks may not set their official interest rates independent of interest rates in advanced countries. Indeed, our VAR analysis exercise supports this argument for the Turkish case. Existing policy framework would not produce desired outcomes unless the sources of the problems such as financial flows as the main global constraints on monetary policy are addressed in a much more serious manner

Suggested Citation

  • Ahmet Benlialper & Hasan Comert, 2015. "Global Constraints on Central Banking:The case of Turkey," Working papers wpaper111, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    • Handle: RePEc:fes:wpaper:wpaper111
    as

    Download full text from publisher

    File URL: http://fessud.eu/wp-content/uploads/2015/03/Global-Constraints-on-Central-Banking-The-Case-of-Turkey-Working-Paper-111.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Ben S. Bernanke & Mark Gertler, 2001. "Should Central Banks Respond to Movements in Asset Prices?," American Economic Review, American Economic Association, vol. 91(2), pages 253-257, May.
    2. Hakan Kara & Fethi Ogunc, 2005. "Exchange Rate Pass-Through in Turkey : It is Slow, but is it Really Low?," Working Papers 0510, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    3. Joshua Aizenman & Mahir Binici & Michael M. Hutchison, 2016. "The Transmission of Federal Reserve Tapering News to Emerging Financial Markets," International Journal of Central Banking, International Journal of Central Banking, vol. 12(2), pages 317-356, June.
    4. Marvin Goodfriend, 2007. "How the World Achieved Consensus on Monetary Policy," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 47-68, Fall.
    5. repec:ilo:ilowps:464250 is not listed on IDEAS
    6. Anwar, Sarah. & Islam, Iyanatul,, 2011. "Should developing countries target low, single digit inflation to promote growth and employment," ILO Working Papers 994642503402676, International Labour Organization.
    7. Koray Alper & Hakan Kara & Mehmet Yörükoglu, 2013. "Alternative tools to manage capital flow volatility," BIS Papers chapters, in: Bank for International Settlements (ed.), Sovereign risk: a world without risk-free assets?, volume 73, pages 335-352, Bank for International Settlements.
    8. Kürşat KUNTER & Şükrü BİNEY, 1999. "Türkiye''de Mali Liberalleşmede Merkez Bankasının Rolü 1980-1997," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 14(154), pages 24-48.
    9. Ahmet Faruk Aysan & Salih Fendoğlu & Mustafa Kilinç, 2015. "Macroprudential Policies As Buffer Against Volatile Cross-Border Capital Flows," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 60(01), pages 1-26.
    10. A. Kara, 2013. "Monetary Policy after the Global Crisis," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 41(1), pages 51-74, March.
    11. Pinar Bedirhanoglu & Hasan Comert & Ipek Eren & Isil Erol & Demir Demiroz & Nilgün Erdem & Ali Riza Gungen & Thomas Marois & Aylin Topal & Oktar Turel & Galip Yalman & Erinc Yeldan & Ebru Voyvoda, 2013. "Comparative Perspective on Financial System in the EU, Country Report on Turkey," FESSUD studies fstudy11, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    12. Akyuz, Yilmaz & Boratav, Korkut, 2003. "The Making of the Turkish Financial Crisis," World Development, Elsevier, vol. 31(9), pages 1549-1566, September.
    13. Mehtap Kesriyeli, 1997. "1980'li Yillardan Gunumuze Para Politikasi Gelismeleri," Working Papers 9704, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    14. Erdem Basci & Hakan Kara, 2011. "Financial Stability and Monetary Policy," Working Papers 1108, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    15. Michael Woodford, 2003. "Optimal Interest-Rate Smoothing," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 70(4), pages 861-886.
    16. Aizenman, Joshua & Binici, Mahir & Hutchison, Michael M, 2014. "The Transmission of Federal Reserve Tapering News to Emerging Financial Markets," Santa Cruz Department of Economics, Working Paper Series qt7n17z9km, Department of Economics, UC Santa Cruz.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ahmet Aysan & Salih Fendoglu & Mustafa Kilinc, 2014. "Managing short-term capital flows in new central banking: unconventional monetary policy framework in Turkey," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 4(1), pages 45-69, June.
    2. 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.
    3. 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.
    4. Değerli, Ahmet & Fendoğlu, Salih, 2015. "Reserve option mechanism as a stabilizing policy tool: Evidence from exchange rate expectations," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 166-179.
    5. Ülke, Volkan, 2015. "The Degree of Currency Substitution and Exchange Rate Pass-Through," MPRA Paper 75633, University Library of Munich, Germany, revised 15 Dec 2015.
    6. Tadle, Raul Cruz, 2022. "FOMC minutes sentiments and their impact on financial markets," Journal of Economics and Business, Elsevier, vol. 118(C).
    7. Yoshito Funashima, 2022. "Economic policy uncertainty and unconventional monetary policy," Manchester School, University of Manchester, vol. 90(3), pages 278-292, June.
    8. Bartkiewicz Piotr, 2018. "The Impact of Quantitative Easing on Emerging Markets – Literature Review," Financial Internet Quarterly (formerly e-Finanse), Sciendo, vol. 14(4), pages 67-76, December.
    9. Eugenio Cerutti & Stijn Claessens & Andrew K. Rose, 2019. "How Important is the Global Financial Cycle? Evidence from Capital Flows," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 67(1), pages 24-60, March.
    10. McQuade, Peter & Falagiarda, Matteo & Tirpák, Marcel, 2015. "Spillovers from the ECB's non-standard monetary policies on non-euro area EU countries: evidence from an event-study analysis," Working Paper Series 1869, European Central Bank.
    11. Levent, Korap, 2007. "Impact of Exchange Rate Changes on Domestic Inflation: he Turkish Experience," MPRA Paper 19589, University Library of Munich, Germany.
    12. Konopczak, Michal, 2015. "Government debt holdings of non-residents – an analysis of the impact on selected emerging economies’ sovereign risk," MPRA Paper 68597, University Library of Munich, Germany.
    13. Bertrand Candelon & Laurent Ferrara & Marc Joëts, 2021. "Global financial interconnectedness: a non-linear assessment of the uncertainty channel," Applied Economics, Taylor & Francis Journals, vol. 53(25), pages 2865-2887, May.
    14. Nihar Shah, 2022. "Doubly heterogeneous monetary spillovers," International Finance, Wiley Blackwell, vol. 25(2), pages 126-150, August.
    15. Prachi Mishra & Papa N’Diaye & Lam Nguyen, 2018. "Effects of Fed Announcements on Emerging Markets: What Determines Financial Market Reactions?," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 66(4), pages 732-762, December.
    16. Agur, Itai & Chan, Melissa & Goswami, Mangal & Sharma, Sunil, 2019. "On international integration of emerging sovereign bond markets," Emerging Markets Review, Elsevier, vol. 38(C), pages 347-363.
    17. Pierre‐Richard Agénor & Timothy Jackson & Enisse Kharroubi & Leonardo Gambacorta & Giovanni Lombardo & Luiz A. Pereira Da Silva, 2021. "Assessing the Gains from International Macroprudential Policy Cooperation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(7), pages 1819-1866, October.
    18. Jonathan Kearns & Andreas Schrimpf & Fan Dora Xia, 2023. "Explaining Monetary Spillovers: The Matrix Reloaded," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(6), pages 1535-1568, September.
    19. Chen, Hongyi & Tillmann, Peter, 2025. "Monetary policy spillovers: Is this time different?," Journal of International Money and Finance, Elsevier, vol. 152(C).
    20. Viorica CHIRILA & Ciprian CHIRILA, 2018. "Effects of US Monetary Policy on Eastern European Financial Markets," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 10(2), pages 149-166, August.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G01 - Financial Economics - - General - - - Financial Crises
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fes:wpaper:wpaper111. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Helen Evans The email address of this maintainer does not seem to be valid anymore. Please ask Helen Evans to update the entry or send us the correct address (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.