Is there an interest rate channel for monetary policy in Turkey?

Download

348-1767-1-PB.pdf

Date

2010-12

Author

Erdoğan, Seyfettin
Yıldırım, Durmuş Çağrı

Metadata

Show full item record

This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Item Usage Stats

249
views

222
downloads

The changes in monetary authority’s decisions may affect the behavior of economic agents and thus the level of aggregate demand. Namely; a change in the short term interest rate is made by the central bank directly affects the user cost of capital and firms’ decisions about investment expenditure. In the monetary policy literature, this mentioned process is defined as the interest rate channel. To guide policy makers it is important to investigate whether interest rate channel operates. Determination of the effect of short-term interest rate changes (increase or decrease) made by monetary authorities on the long-term interest rate is necessary for introducing the effects of the monetary authority’s decision on output. Because the changes in the short-term interest rates affect the investment and consumption decision by changing the long-term interest rate. The aim of this paper is to investigate empirically the interest rate channel of monetary transmission mechanism in Turkey for 1995:01-2008:9 periods. The findings showed the existence of interest rate channel. Because price stability in Turkey was satisfied after 2002, the functioning of interest rate channel has examined by dividing the sample into two sub-periods (1995:01-2002:02 and 2002:03-2008:09). The results present that the interest rate channel was operated only in the second sub-period.

Subject Keywords

Interest rate channel, Monetary transmission mechanism, Monetary policy

URI

http://www2.feas.metu.edu.tr/metusd/ojs/index.php/metusd/article/view/348
https://hdl.handle.net/11511/58374

Journal

ODTÜ Gelişme Dergisi

Collections

Department of Economics, Article

Suggestions

OpenMETU
Core

Can endogenous changes in price flexibility alter the relative welfare performance of exchange rate regimes? Senay, Ozge; Sutherland, Alan (2004-06-19) A dynamic general equilibrium model of a small open economy is presented where agents may choose the frequency of price changes. A fixed exchange rate is compared to inflation targeting and money targeting. A fixed rate generates more price flexibility than the other regimes when the expenditure switching effect is relatively weak, while money targeting generates more flexibility when the expenditure switching effect is strong. These endogenous changes in price flexibility can lead to changes in the welfare...
An evaluation of the trilemma: global constraints on monetary policies of developing countries in the post Bretton Woods era Tercioğlu, Remzi Barış; Cömert, Hasan; Department of Economics (2016) This study investigates monetary policy independence of developing countries in the context of the trilemma concept in the post Bretton Woods Era. Throughout the thesis, multidirectional effects of financial flows on monetary policies of developing countries are described and limits on effectiveness of the policy rate tool are discussed. As empirical evidence shows, global factors restrict central bank independence in developing countries and the policy rate tool is not effective enough in influencing long-...
Analysis of the monetary stance of Turkey between 2011 and 2018 with a new monetary conditions index: the roles of government bond yields and the exchange rate Kaptan, Savaş; Gaygısız Lajunen, Esma; Department of Economics (2019) Measuring the monetary policy stance of central banks is a much-debated issue in the literature. The changing economic dynamics over the time and different structures of economies have made impossible to use only short term interest rates, monetary aggregates or money market rates for analyzing the monetary stance. Accordingly, comprehensive monetary conditions indexes have been discovered and some central banks have started to use them as an operational target. In line with these developments, the main aim...
Optimal monetary policy and the timing of asset trade in open economies Senay, Ozge; Sutherland, Alan (2007-05-01) This paper analyses the timing of asset trade and its implications for monetary policy and welfare in open economies. Optimal policy is shown to differ significantly depending on whether asset trade takes place before or after policy decisions are made.
Effects of monetary policy on banking interest rates: interest rate pass-through in Turkey Sağır, Serhat; Yıldırak, Şahap Kasırga; Department of Financial Mathematics (2011) In this study, the effects of CBRT monetary policy decisions on the consumer, automobile, housing and commercial loans of the banks during the period from the early of 2004 to the middle of 2011 are examined. In order to perform this study, it is benefited from weekly weighted average loan interest rate data of the banks, which is the data having the highest frequency that could be obtained from the electronic data distribution system of CBRT. Monetary policy instruments of Central Bank may change in the co...

Citation Formats

S. Erdoğan and D. Ç. Yıldırım, “Is there an interest rate channel for monetary policy in Turkey?,” ODTÜ Gelişme Dergisi, vol. 37, no. 3, pp. 247–266, 2010, Accessed: 00, 2020. [Online]. Available: http://www2.feas.metu.edu.tr/metusd/ojs/index.php/metusd/article/view/348.