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The monetary transmission mechanism in Turkey : New developments

  • Erdem Basci
  • Ozgur Ozel
  • Cagri Sarikaya

The objective of this paper is to study the changes in the monetary policy transmission mechanism in Turkey. The analysis hinges upon both qualitative and quantitative evidence regarding various channels of monetary policy transmission. The arguments about the extent of the exchange rate, interest rate, asset price, credit and expectations channel are based on various studies conducted especially in the aftermath of the February 2001 financial crisis. The paper asserts that the interest rate and the credit channel have an increasingly visible effect on economic activity, while the prominence of the exchange rate channel tends to attenuate in the post-crisis period thanks to prudent fiscal policies and the start of the inflation-targeting regime under floating exchange rates. Furthermore, the improvements in the communication policy increased the ability of the Central Bank of Turkey in managing expectations along with an enhanced credibility.

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File URL: http://www.tcmb.gov.tr/wps/wcm/connect/ac9229ee-24a5-4689-8287-43a2388ee707/WP0704ENG+%281%29.pdf?MOD=AJPERES&CACHEID=ac9229ee-24a5-4689-8287-43a2388ee707
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Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 0704.

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Date of creation: 2007
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Handle: RePEc:tcb:wpaper:0704
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  1. Woodford, Michael, 1999. "Optimal monetary policy inertia," CFS Working Paper Series 1999/09, Center for Financial Studies (CFS).
  2. Halil Ibrahim Aydin, 2007. "Interest Rate Pass-Through in Turkey," Working Papers 0705, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  3. Fatih Ozatay, 2005. "Monetary Policy Challenges for Turkey in European Union Accession Process," Working Papers 0511, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  4. Julio J. Rotemberg & Michael Woodford, 1999. "Interest Rate Rules in an Estimated Sticky Price Model," NBER Chapters, in: Monetary Policy Rules, pages 57-126 National Bureau of Economic Research, Inc.
  5. Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
  6. Guillermo A. Calvo & Frederic S. Mishkin, 2003. "The Mirage of Exchange Rate Regimes for Emerging Market Countries," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 99-118, Fall.
  7. Calvo, Guillermo & Vegh, Carlos, 1992. "Currency Substitution in Developing Countries: An Introduction," MPRA Paper 20338, University Library of Munich, Germany.
  8. Mehtap Kesriyeli & Erdal Ozmen & Serkan Yigit, 2005. "Corporate Sector Debt Composition and Exchange Rate Balance Sheet Effect in Turkey," Working Papers 0516, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  9. Bahmani-Oskooee, Mohsen & Kara, Orhan, 2000. "Exchange rate overshooting in Turkey," Economics Letters, Elsevier, vol. 68(1), pages 89-93, July.
  10. Michael Woodford, 2001. "The Taylor Rule and Optimal Monetary Policy," American Economic Review, American Economic Association, vol. 91(2), pages 232-237, May.
  11. 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.
  12. Hakan Kara & Hande Küçük-Tuger & Ümit Özlale & Burç Tuger & Eray M. Yücel, 2007. "Exchange Rate Regimes And Pass-Through: Evidence From The Turkish Economy," Contemporary Economic Policy, Western Economic Association International, vol. 25(2), pages 206-225, 04.
  13. Olivier Blanchard, 2004. "Fiscal Dominance and Inflation Targeting: Lessons from Brazil," NBER Working Papers 10389, National Bureau of Economic Research, Inc.
  14. Sukru Binay & Ferhan Salman, 2007. "A Critique on Turkish Real Estate Market," Working Papers 2008/8, Turkish Economic Association.
  15. Eduardo Morón & Diego Winkelried, 2003. "Monetary Policy Rules for Financially Vulnerable Economies," IMF Working Papers 03/39, International Monetary Fund.
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