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Monetary Policy and Output Gap : Mind the Composition

  • Harun Alp
  • Fethi Ogunc
  • Cagri Sarikaya

[TR] Bu calismada Bayesci yontem kullanilarak Turkiye’de çikti acigini temel bilesenlerine ayristiran bir çerçeve sunulmaktadir. Sonuclarimiz, Lehman krizini takip eden surecte Turkiye’de ic ve dis talep arasinda ciddi bir ayrisma yasanirken, ekonomi genelinde asiri bir isinma olmadigini gostermektedir. Bu bulgular, Turkiye Cumhuriyet Merkez Bankasi'nin (TCMB) yeni politika cercevesine zemin hazirlayan ve kayda deger bir enflasyon baskisi olmaksizin hizli kredi buyumesi ve artan cari islemler acigi ile tanimlanabilecek iktisadi gorunume iliskin goruslerini desteklemektedir. Bu kosullar altinda salt toplam cikti acigina dayandirilan geleneksel para politikasi yaklasimi finansal istikrar ile uyumlu olmayan bir politika onermesinde bulunabilecektir. Bu baglamda,cikti acigi bilesenlerinin turetilmesi, tutarli politikalarin tasarlanmasinda karar alicilara yardimci olacaktir. [EN] We estimate an output gap measure for Turkey in a Bayesian framework with special reference to its components. Our results suggest that Turkey experienced a notable divergence between domestic and external demand with no sign of overheating for the whole economy in the post-Lehman crisis period. This finding confirms the basis for the new policy framework of the Central Bank of Turkey (CBT), which was characterized by rapid credit expansion and growing current account deficit without significant inflationary pressures. Under these circumstances, conventional monetary policy practice focusing solely on aggregate output gap may suggest policy prescriptions inconsistent with financial stability. In this regard, extracting the components of output gap would help policymakers make a suitable policy design to avoid any contradiction among objectives.

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File URL: http://www.tcmb.gov.tr/wps/wcm/connect/a580b85d-42c6-48c6-a634-25a059f5413d/EN1207.pdf?MOD=AJPERES&CACHEID=a580b85d-42c6-48c6-a634-25a059f5413d
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Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series CBT Research Notes in Economics with number 1207.

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Date of creation: 2012
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Handle: RePEc:tcb:econot:1207
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  1. Guillermo A. Calvo, 1998. "Capital Flows and Capital-Market Crises: The Simple Economics of Sudden Stops," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 35-54, November.
  2. M. Faruk Aydin & Ugur Ciplak & Eray M. Yucel, 2004. "Export Supply and Import Demand Models for the Turkish Economy," Working Papers 0409, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  3. Enrique G. Mendoza, 2010. "Sudden Stops, Financial Crises, and Leverage," American Economic Review, American Economic Association, vol. 100(5), pages 1941-66, December.
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