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Does the central bank directly respond to output and inflation uncertainties in Turkey?

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  • Pelin Oge Guney

Abstract

This paper investigates the role of inflation and output uncertainties on monetary policy rules in Turkey for the period 2002 : 01–2014 : 02. In the literature it is suggested that uncertainty is a key element in monetary policy, hence empirical models of monetary policy should regard to uncertainty. In this study, we estimate a forward-looking monetary reaction function of the Central Bank of the Republic of Turkey (CBRT). In addition to inflation and output gap variables, our reaction function also includes both the inflation and output growth uncertainties. Our results suggest that the Central Bank of the Republic of Turkey (CBRT) concerns with mainly price stability and significantly responds to inflation and growth uncertainties.

Suggested Citation

  • Pelin Oge Guney, 2016. "Does the central bank directly respond to output and inflation uncertainties in Turkey?," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 16(2), pages 53-57.
    • Handle: RePEc:tcb:cebare:v:16:y:2016:i:2:p:53-57
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    Cited by:

    1. Umit Bulut, 2019. "Does the Central Bank of the Republic of Turkey Respond Asymmetrically to Inflation and Output?," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 13(4), pages 381-400, November.

    More about this item

    Keywords

    Uncertainty; Taylor rule; Monetary policy; Turkey; GMM;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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