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Central Banking in Making during the Post-Crisis World and the Policy-Mix of the Central Bank of the Republic of Turkey

Author

Listed:
  • Yasin Akçelik

    (Economist, Central Bank of the Republic of Turkey)

  • Ahmet Faruk Aysan

    (Member of the Board and Monetary Policy Committee Member, Central bank of the Republic of Turkey)

  • Arif Oduncu

    (Director of the European Union Relations Division, Central Bank of the Republic of Turkey)

Abstract

After the global crisis, one of the most important lessons learned by central banks appears to be the vital importance of financial stability along with price stability. Hence, finding solutions to how to incorporate the financial stability objective in the pursuit of monetary policy without diluting the price stability objective has started to be heavily discussed by academics and policy makers. Accordingly, it has started to be debated that the using of only short-term interest rates as the main policy tool may not be enough to maintain price stability and financial stability at the same time. Interest rates that provide price stability and financial stability can be different and this necessitates central banks to use multiple policy tools. In view of this, the Central Bank of the Republic of Turkey adopted a new monetary policy framework called the new policy mix in which multiple tools are employed to achieve multiple objectives. In this framework, the required reserves ratios, weekly repo rates, interest rate corridor, funding strategy and other macro prudential tools are jointly used as complementary tools for the credit, interest rate and liquidity policies to achieve the price and financial stability objectives concurrently. This new monetary policy adopted in Turkey also provides an interesting case study to assess how a country came up with novel policies to account for its country specific characteristics.

Suggested Citation

  • Yasin Akçelik & Ahmet Faruk Aysan & Arif Oduncu, 2013. "Central Banking in Making during the Post-Crisis World and the Policy-Mix of the Central Bank of the Republic of Turkey," Journal of Central Banking Theory and Practice, Central bank of Montenegro, vol. 2(2), pages 5-18.
    • Handle: RePEc:cbk:journl:v:2:y:2013:i:2:p:5-18
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    References listed on IDEAS

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    Cited by:

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    2. Yeldan A. Erinc & Kolsuz Gunes & Unuvar Burcu, 2014. "What to Smooth: Rate of Interest or the Foreign Exchange? Turkish Monetary Policy under Turbulent Times," Review of Middle East Economics and Finance, De Gruyter, vol. 10(3), pages 247-261, December.
    3. Ahmet Aysan & Salih Fendoglu & Mustafa Kilinc, 2014. "Managing short-term capital flows in new central banking: unconventional monetary policy framework in Turkey," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 4(1), pages 45-69, June.
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    6. Umit BULUT, 2015. "The Interest Rate Corridor as a Macroprudential Tool to Mitigate Rapid Growth in Credits: Evidence from Turkey," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(4(605), W), pages 133-144, Winter.
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    More about this item

    Keywords

    Central banking; Policy-mix; Global financial crisis; Financial Stability;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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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