scholarly journals What to Smooth: Rate of Interest or the Foreign Exchange? Turkish Monetary Policy under Turbulent Times

2014 ◽  
Vol 10 (3) ◽  
Author(s):  
A. Erinc Yeldan ◽  
Gunes Kolsuz ◽  
Burcu Unuvar
Keyword(s):  
Interest Rate ◽  
Foreign Exchange ◽  
Great Recession ◽  
Inflation Targeting ◽  
Policy Option ◽  
The Great Recession ◽  
Turbulent Times ◽  
Exchange Markets ◽  
The Interest Rate ◽  
Republic Of Turkey

AbstractThis paper studies the new monetary stance of the Central Bank of Republic of Turkey (CBRT) during the Great Recession. We note that characteristics of the post-1997 “Great Moderation” revealed interest rate smoothing as a valid policy option for the inflation targeting central banks. Utilizing econometric analysis on a general form of a Taylor Rule, we search for the relative weights of the objective function of the CBRT over Jan 2010–Dec 2013. We find that over the Great Recession, the CBRT’s focus on “interest smoothing” had been maintained; and yet the burden of adjustment fell disproportionately on the foreign exchange markets. Furthermore, weak credibility of the CBRT, lack of a simple policy rule, and noisy policy communications evidence that pre-requisites of the interest rate smoothing are not being fulfilled. Inevitable sharp policy corrections that follow smoothing periods proved insufficient against the voluminous global flows.

scholarly journals Investment Hangover and the Great Recession

2018 ◽  
Vol 10 (2) ◽  
pp. 113-153 ◽  
Author(s):  
Matthew Rognlie ◽  
Andrei Shleifer ◽  
Alp Simsek
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Great Recession ◽  
The Great Recession ◽  
Left Behind ◽  
Ex Post ◽  
Ex Ante ◽  
The Interest Rate

We present a model of investment hangover motivated by the Great Recession. Overbuilding of durable capital such as housing requires a reallocation of productive resources to other sectors, which is facilitated by a reduction in the interest rate. When monetary policy is constrained, overbuilding induces a demand-driven recession with limited reallocation and low output. Investment in other capital initially declines due to low demand, but it later booms and induces an asymmetric recovery in which the overbuilt sector is left behind. Welfare can be improved by ex post policies that stimulate investment (including in overbuilt capital) and ex ante policies that restrict investment. (JEL E22, E23, E32, E43, E52, R21, R31)

Central Banking after the Great Recession

2018 ◽  
Author(s):  
Francesco Papadia ◽  
Tuomas Vӓlimӓki
Keyword(s):  
Interest Rate ◽  
Central Bank ◽  
Great Recession ◽  
Financial Stability ◽  
Central Banking ◽  
Global Perspective ◽  
Quantitative Easing ◽  
The Great Recession ◽  
The Interest Rate ◽  
Monetary And Fiscal Policy

The central banking model prevailing before the Great Recession suffered six hits during the crisis. First, new financial stability responsibilities created dilemmas in the use of the interest rate. Second, quantitative easing blurred the borders between monetary and fiscal policy. Third, the action to support banks and, in the euro-area, peripheral sovereigns created moral hazard. Fourth, the ECB had to take on itself the task of preserving the euro. Fifth, the ECB had to participate in the so-called troika. Sixth, both the Fed and the ECB had to adopt a more global perspective. This chapter concludes that these hits have not basically jeopardized the pre-crisis central bank model. Still, four of the six hits to the pre-crisis central bank model identified above have a good probability of requiring changes in the pre-crisis model, thus some incremental adaptations to that model are proposed.

scholarly journals Monetary Policy in the Post Keynesian Theoretical Framework

2017 ◽  
Vol 37 (1) ◽  
pp. 45-64
Author(s):  
FÁBIO HENRIQUE BITTES TERRA ◽  
PHILIP ARESTIS
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Inflation Targeting ◽  
Debt Management ◽  
Policy Framework ◽  
Original Writings ◽  
Policy Model ◽  
Original Contribution ◽  
The Interest Rate ◽  
Monetary Policy Framework

ABSTRACT The purpose of this contribution is to develop a Post Keynesian monetary policy model, presenting its goals, tools, and channels. The original contribution this paper develops, following (Keynes’s 1936, 1945) proposals, is the use of debt management as an instrument of monetary policy, along with the interest rate and regulation. Moreover, this paper draws its monetary policy model by broadly and strongly relying on Keynes’s original writings. A monetary policy model erected upon this basis relates itself directly to the Post Keynesian efforts to offer a monetary policy framework substantially different from the Inflation Targeting Regime of the New Macroeconomic Consensus.

The interest rate–inflation relationship under an inflation targeting regime: The case of Turkey

2012 ◽  
Vol 23 (4) ◽  
pp. 476-485 ◽  
Author(s):  
Nezir Kose ◽  
Furkan Emirmahmutoglu ◽  
Sezgin Aksoy
Keyword(s):  
Interest Rate ◽  
Inflation Targeting ◽  
The Interest Rate

scholarly journals Five Years of Inflation Targeting Without Economic Growth: What Should Be Changed? The Case of Russia

2021 ◽  
Vol 12 (3) ◽  
pp. 162
Author(s):  
Oscar Gasanov
Keyword(s):  
Economic Growth ◽  
Exchange Rate ◽  
Foreign Exchange ◽  
Inflation Targeting ◽  
Exchange Rate Policy ◽  
Economic Agents ◽  
Price Growth ◽  
The Interest Rate ◽  
The Stability ◽  
High Level

The article provides a review of approaches to assessing and analyzing the effectiveness of the interest rate and exchange rate policy of the Bank of Russia in the period 2015-2019. Despite the decrease in the rate of price growth, inflationary expectations of economic agents remain at a high level. Monetary policy continues to be tight. The stability of the exchange rate to external shocks, expected from the introduction of inflation targeting and a free floating rate, did not happen. The complex of conditions that have developed due to geopolitical factors, low growth rates and the global economic crisis caused by the coronavirus pandemic require the search for new targets, such as economic growth and exchange rate stability. To maintain the stability of the ruble exchange rate, it is recommended to sell foreign exchange reserves accumulated according to the "Budget rule" in an equivalent amount; to support the liquidity of banks during periods of an attack on the ruble, it should through foreign exchange REPO, and develop a derivatives market.

Inflation targeting credibility and reputation: The consequences for the interest rate

2009 ◽  
Vol 26 (6) ◽  
pp. 1228-1238 ◽  
Author(s):  
Helder Ferreira de Mendonça ◽  
Gustavo José de Guimarães e Souza
Keyword(s):  
Interest Rate ◽  
Inflation Targeting ◽  
The Interest Rate

The Effects of the Interest Rate and Foreign Exchange Regimes on the Turkish Export

2008 ◽  
Vol 19 (69) ◽  
pp. 47
Author(s):  
Suleyman DEGIRMEN ◽  
Filiz ELMAS
Keyword(s):  
Interest Rate ◽  
Foreign Exchange ◽  
The Interest Rate

scholarly journals Impact of politically generated shocks on monetary performance: a cross-country comparison

2019 ◽  
Vol 14 (3) ◽  
pp. 99-112 ◽  
Author(s):  
Fedir Zhuravka ◽  
Mykhaylo Makarenko ◽  
Valerii Osetskyi ◽  
Oleksandr Podmarov ◽  
Victor Chentsov
Keyword(s):  
Great Recession ◽  
Budget Deficit ◽  
Inflation Targeting ◽  
Military Conflict ◽  
Country Comparison ◽  
High Unemployment Rate ◽  
Deficit Financing ◽  
Exchange Markets ◽  
Cross Country ◽  
The Military

During the post-Great Recession period, macroeconomic stability had more often been threatened by socioeconomic shocks due to the rising of public discontent with the high unemployment rate and poverty, the activation of radical parties and movements, and the aggravation of the geopolitical confrontation in the world. Depending on the type and depth of such shocks, they become politically generated shocks and, in particular, affect the monetary sphere. The article investigates three types of politically generated shocks and their impact on the monetary sphere. It has been found out that the shocks generated by political populism are characterized by fiscal domination in the economy, the use of monetary measures in the budget deficit financing. Shocks arising after the use of international sanctions against certain countries have an external origin and primarily cause the increase in national exchange markets volatility. On the whole, macroeconomic and, especially, monetary instability is the result of the great shocks for the economy, the depth and duration of which are determined by the nature of the crisis, particularly, when country participates in the military conflict. The aforementioned types of politically generated shocks are analyzed based on the experience of countries such as Argentina, Turkey, and Ukraine, which at one time introduced the regime of inflation targeting in monetary policy, but were forced to modify it influenced by political and economic instability.

scholarly journals Adopting Inflation Targeting in Pakistan: An Empirical Analysis

2010 ◽  
Vol 15 (2) ◽  
pp. 51-76 ◽  
Author(s):  
Nadia Saleem
Keyword(s):  
Monetary Policy ◽  
Inflation Targeting ◽  
Inflation Rate ◽  
Policy Option ◽  
Price Stability ◽  
Potential Candidate ◽  
Long Run ◽  
The Interest Rate ◽  
Nominal Anchor

The objective of this paper is to assess the conditions for inflation targeting in Pakistan. The recent inflationary surge in Pakistan calls for rethinking monetary policy afresh. This paper argues the case for inflation targeting in Pakistan as a policy option to achieve price stability. The country experienced an inflation rate of just below 10 percent during 1970-2009, which makes it a potential candidate for inflation targeting. Applying the VAR technique to data for the same period, inflation is shown to be adaptive in nature, leading us to reject the accelerationist hypothesis. The Lucas critique holds as people are found to use forward-looking models in forming expectations about inflation. The paper also sheds some light on the State Bank of Pakistan’s level of preparedness for the possibility of adopting inflation targeting, for which transparency and autonomy are prerequisites. The interest rate channel can play the role of a nominal anchor in the long run.

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