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An Analysis of Time Inconsistency in Turkey with ARDL Method

Author

Listed:
  • Bora Suslu
  • Selahattin Bekmez

Abstract

Since two main principles of the monetary policy are credibility and transparency, central banks aim to develop long-run policies. However, contemporary monetary policy approach requires that central banks are responsible for developing short-run stability policies as well. Within this context, central banks find themselves in a trade-off between short-run and longrun policy developments. Because of this trade off time inconsistency reveals. In this article, we investigate if TCMB’s monetary policy after 2001 creates time inconsistency by using ARDL method. The findings indicate that TCMB’s monetary policy didn’t create time inconsistent results. Findings also showed that economic agents have rational expectations.

Suggested Citation

  • Bora Suslu & Selahattin Bekmez, 2010. "An Analysis of Time Inconsistency in Turkey with ARDL Method," Journal of BRSA Banking and Financial Markets, Banking Regulation and Supervision Agency, vol. 4(2), pages 85-110.
    • Handle: RePEc:bdd:journl:v:4:y:2010:i:2:p:85-110
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    More about this item

    Keywords

    Time Inconsistency; Monetary Policy; ARDL Method;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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