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In Turkey, the Monetary Policy, Exchange Rate Importance: Conditions Index (MCI) Analysis

Author

Listed:
  • Hakan Eryüzlü

    (İskenderun Teknik University)

  • Tayfur Bayat

    (İnönü University)

  • İzzet Taşar

    (Fırat University)

Abstract

Central banks, are independent in modern economies of targets or tools. Central Bank of the Republic of Turkey (CBRT) has been independent since 2001 (with “transition to strong economy program”) in terms of tools it uses in order to assure price stability. The CBRT implements the “inflation targeting” regime, where the short-term interest rate is the main policy instrument and the exchange rate is mostly abandoned to the market mechanism. CBRT envisages that the exchange rate decreases the impact on Turkey’s economy, because of “inflation targeting” regime. But the argument that exchange rate is a significant variable has not ended. In the study, it is concluded that exchange rates are still as important a variable as interest rates for Turkey and Monetary Condition Index is an available rule for monetary policy in Turkey.

Suggested Citation

  • Hakan Eryüzlü & Tayfur Bayat & İzzet Taşar, 2019. "In Turkey, the Monetary Policy, Exchange Rate Importance: Conditions Index (MCI) Analysis," Journal of Finance Letters (Maliye ve Finans Yazıları), Maliye ve Finans Yazıları Yayıncılık Ltd. Şti., vol. 34(111), pages 51-78, April.
    • Handle: RePEc:acc:malfin:v:34:y:2019:i:111:p:51-78
    DOI: https://doi.org/10.33203/mfy.455835
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    More about this item

    Keywords

    Monetary Policy; Monetary Condition Index; Central Bank;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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