Karaşahin, Ramazan
Recent global financial crisis has made it crystal clear that solely price stability is not enough for macroeconomic stability. A new consensus underlining financial stability as a prerequisite for macroeconomic stability emerged. However, there is not agreement neither on the exact definition of financial stability nor on the appropriate tools to reach financial stability. Macroprudential policies are widely employed by policy makers for financial stability purposes following the global crisis, in particular in emerging market economies, despite the scarcity of both theoretical and empirical work on these policies and their efficacy. We contribute to this field by giving a special emphasis to Turkish experience. We document the macroprudential policies applied in Turkey with their policy intentions. We also develop a theoretical small open economy model to study the impacts of macroprudential policy shocks. Our results show that loosen- ing loan-to-value shocks and capital adequacy shocks trigger credit and deposit growth, output, and inflation. Nevertheless, the responses differ with respect to targeted sectors. Our empirical analysis on Turkish data reveal that change in consumer lending spreads increases whereas inflation and industrial production decline after a reserve requirement hike. Similar to theoretical model results, real credit growth improves following an increase in the average loan-to-value cap. Industrial production growth and inflation also rise after a loosening loan- to-value shock.


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Citation Formats
R. Karaşahin, “MACROPRUDENTIAL POLICIES FOR SMALL OPEN ECONOMIES,” Ph.D. - Doctoral Program, Middle East Technical University, 2022.