scholarly journals How Far Ahead Does the Central Bank of the Republic of Turkey Look?

2016 ◽  
Vol 5 (1) ◽  
pp. 99-111 ◽  
Author(s):  
Umit Bulut
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Interest Rates ◽  
Monetary Economics ◽  
Inflation Expectations ◽  
Reaction Functions ◽  
Expected Inflation ◽  
The Republic ◽  
Monetary Policy Reaction Functions ◽  
Republic Of Turkey

Abstract In monetary economics literature, there is an agreement that monetary policy has a lagged effect on inflation. As a result of this agreement, monetary policy reaction functions that include expected inflation, instead of current or lagged inflation, are established. On the other hand, there is uncertainty about how much time monetary policy needs to affect inflation. The purpose of this paper is to estimate empirically how far ahead the Central Bank of the Republic of Turkey looks. In other words, the paper examines whether the CBRT takes into consideration 12-month ahead inflation expectations or 24-month ahead inflation expectations while steering interest rates. According to the results of the paper, the CBRT considers 12-month ahead inflation expectations while steering interest rates.

A NOTE ON TIME VARIATION IN A FORWARD-LOOKING MONETARY POLICY RULE: EVIDENCE FROM EUROPEAN COUNTRIES

2012 ◽  
Vol 16 (S3) ◽  
pp. 422-437 ◽  
Author(s):  
N. Kundan Kishor
Keyword(s):  
Monetary Policy ◽  
Time Variation ◽  
Monetary Economics ◽  
Time Varying ◽  
Reaction Functions ◽  
The United Kingdom ◽  
Expected Inflation ◽  
Time Varying Parameter ◽  
Monetary Policy Reaction Functions ◽  
Forward Looking

This paper estimates time-varying forward-looking monetary policy reaction functions for the central banks of France, Germany, Italy, and the United Kingdom. We utilize the framework developed by Kim [Economics Letters91 (2006) 21–26] and Kim and Nelson [Journal of Monetary Economics(2006) 1949–1966] to deal with the issue of endogeneity in a time varying–parameter model. Our results find substantial time variation in the conduct of monetary policy in these four countries, which cannot be adequately captured by the conventional fixed-coefficient approach. Our findings suggest that there was a significant decline in the Bank of France's and the Bank of Italy's response to the German interest rate in 1992, and it coincided with the breakdown of the exchange rate management system in Europe. Our results suggest that the Bank of England was slower than the Bundesbank to increase its response to expected inflation, as its response to inflation became more than one-for-one only in the early 1980s.

scholarly journals The Role of Monetary Policy Announcements on Turkish Banks' Stock Returns

2016 ◽  
Vol 6 (1) ◽  
pp. 63-69
Author(s):  
Nida Abdioğlu ◽  
Sinan Aytekin
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Stock Returns ◽  
Abnormal Returns ◽  
Cumulative Abnormal Returns ◽  
Monetary Policy Committee ◽  
The Republic ◽  
The Impact ◽  
Republic Of Turkey

This paper investigates the impact of monetary policy committee decisions of the Central Bank of the Republic of Turkey on the stock returns of the deposit banks listed in Borsa Istanbul Banks Index (XBANK). The cumulative abnormal returns of the banks are calculated for 2008 and 2012. We report that the monetary policy announcements affect cumulative abnormal returns of the deposits banks both in 2008 and 2012. Since the announcement of the monetary policy decisions created abnormal returns, we conclude that the market does not have semi-strong form efficiency.

scholarly journals An Empirical Analysis of the Monetary Policy Reaction Function

2018 ◽  
Vol 10 (3) ◽  
pp. 30
Author(s):  
Felix S. Nyumuah
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Inflation Targeting ◽  
Policy Instruments ◽  
Ordinary Least Squares ◽  
Policy Rule ◽  
Reaction Functions ◽  
Expected Inflation ◽  
Monetary Policy Reaction Function ◽  
Consistent Response

Monetary policy decisions usually follow a policy rule which shows a consistent response of policy instruments to variations in inflation and economic growth. The aim of this study is to establish the nature of monetary policy in developing countries through the analysis of policy reaction functions. This study uses macroeconomic data from Ghana, a typical developing country. The study employs the Dynamic Ordinary Least Squares Estimation techniques and finds the central bank to follow a backward-looking Taylor rule. The evidence is that the central bank follows some form of policy rule and focuses more on past inflation relative to current or expected inflation. The results also indicate that the Bank of Ghana has been pursuing inflation targeting monetary policy. The central bank follows an inflation targeting rule allowing for output stabilisation. The exchange rate also plays a role in this stabilization effort.

scholarly journals Have Financial Stability Concerns Changed the Priority of the Central Bank of the Republic of Turkey?

2017 ◽  
Vol 12 (2) ◽  
pp. 35-45 ◽  
Author(s):  
Ekrem Erdem ◽  
Umit Bulut ◽  
Emrah Kocak
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Financial Stability ◽  
Nominal Exchange Rate ◽  
Policy Framework ◽  
Price Stability ◽  
Cointegration Tests ◽  
The Republic ◽  
Republic Of Turkey ◽  
Monetary Policy Framework

Abstract This paper aims at analysing whether the Central Bank of the Republic of Turkey (CBRT), designing a new monetary policy framework to achieve financial stability in the last quarter of 2010, tries to pursue financial stability by putting price stability on the back burner. To this end, a forward-looking reaction function that is extended with nominal exchange rate gap and nominal domestic credits gap is estimated for the CBRT. The paper first performs unit root and cointegration tests and finds that the variables become stationary at first differences and that there is a cointegration relationship among variables. Then, the paper conducts the Kalman filter to obtain time varying parameters. The findings show that the coefficients of all explanatory variables did not change too much after the new monetary policy framework of the CBRT in the last quarter of 2010. Therefore, this paper asserts that the CBRT continues to pursue price stability as its primary goal and tries to achieve financial stability by using macroprudential tools. Thus this paper concludes that financial stability concerns have not changed the priority of the CBRT.

Does the Central Bank of the Republic of Turkey Respond Asymmetrically to Inflation and Output?

2019 ◽  
Vol 13 (4) ◽  
pp. 381-400
Author(s):  
Umit Bulut
Keyword(s):  
Central Bank ◽  
Interest Rates ◽  
Jel Classification ◽  
Reaction Function ◽  
Asymmetric Reaction ◽  
Distributed Lag ◽  
Autoregressive Distributed Lag ◽  
The Republic ◽  
Republic Of Turkey ◽  
Nonlinear Autoregressive

This article aims to estimate a forward-looking reaction function for the Central Bank of the Republic of Turkey (CBRT) considering possible asymmetries in the reaction function. For this purpose, it uses quarterly data over the period 2006:1–2018:1 and performs the nonlinear autoregressive distributed lag (NARDL) cointegration test. The findings obtained from the NARDL test indicate that the CBRT has an asymmetric reaction function and considers increases in inflation and decreases in output while adjusting short-term interest rates. Theoretical and practical implications for these findings are also discussed. JEL Classification: C22, E52, E58

scholarly journals MONETARY POLICY WHEN THE ZERO LOWER BOUND IS WITHIN REACH: A SMOOTH TRANSITION REGRESSION APPROACH

2019 ◽  
pp. 1-12
Author(s):  
Andreas Steiner
Keyword(s):  
Monetary Policy ◽  
Lower Bound ◽  
Interest Rates ◽  
Global Financial Crisis ◽  
Smooth Transition ◽  
Zero Lower Bound ◽  
Reaction Functions ◽  
Significant Difference ◽  
Smooth Transition Regression ◽  
Monetary Policy Reaction Functions

The period of low interest rates since the global financial crisis provides a unique opportunity to examine monetary policy reaction functions near the zero lower bound (ZLB). Using smooth transition regressions for the Euro area and a panel of industrialized countries we show that central banks anticipate the ZLB by less aggressive policies in its vicinity while we do not find a significant difference between both regimes for the US.

scholarly journals Analysis of the Effect of Weighted Average Cost of the CBRT Funding on BIST100 Index, BISTXBANK Index and Exchange Rate

2017 ◽  
Author(s):  
Serdar Kuzu ◽  
H. Muhammet Kekeç
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Interest Rates ◽  
Weighted Average ◽  
Interest Rate Policy ◽  
Financial Variables ◽  
Funding Cost ◽  
The Republic ◽  
The Interest Rate ◽  
Republic Of Turkey

This study is found to find out how Weighted Average Funding Cost, which is new policy tool implemented by The Central Bank of Turkey (CBRT) in 2011, weighted average funding cost -aiming at removing the ambiguities seen in the financial variables and minimizing the effect of capital movements on these variables is reviewed. In this study, the effects of the interest rate policy of the Central Bank of the Republic of Turkey (CBRT) on BIST100 index, BISTXBANK index and exchange rate are tested by Augmented Dickey Fuller Test (ADF), ML-GARCH and DCC GARCH models based on ENGLE, R.F. and SHEPPARD, K. (2001). According to the findings obtained, it is concluded that the decisions of the Weighted Average Funding Cost related to Central Bank of the Republic of Turkey (CBTR) lending and borrowing interest rates are direct effective on BIST100 index, BISTXBANK index but indirect with Exchange rate.

Turkey's central bank may tighten harder later

2015 ◽  
Keyword(s):  
Central Bank ◽  
Interest Rates ◽  
Emerging Market ◽  
Significant Deterioration ◽  
Content Type ◽  
Road Map ◽  
The Republic ◽  
Sound Management ◽  
Republic Of Turkey ◽  
China’S Economy

Significance This follows the decision by the Central Bank of the Republic of Turkey (CBRT) on August 18 to keep its three main interest rates on hold. Despite the CBRT also announcing a 'road map' for policy normalisation, investors are rapidly losing confidence in the conduct of Turkish monetary policy, as the country heads for snap parliamentary elections. Meanwhile, emerging market (EM) assets remain under strain because of mounting concerns about China's economy and financial markets and the possibility of an imminent rise in US rates. Impacts EMs will suffer a more severe sell-off than during the 'taper tantrum' of mid-2013. This is partly because of the significant deterioration in their economic conditions over the past two years. Lower oil prices will benefit large net importers such as Turkey, but are a significant contributor to deteriorating sentiment towards EMs. The falling lira will put pressure on corporates' large short-term debt, mostly dollar-denominated, while most revenue is in liras. A currency crisis would put at risk President Recep Tayyip Erdogan's reputation for sound management of the economy.

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