Consistency of the central bank of the Republic of Türkiye’s policy stance with its discourses: a fuzzy logic analysis

Abstract

ABSTRACT The purpose of the study is to use fuzzy logic methods to assess the stance of the Central Bank of the Republic of Türkiye (CBRT) towards monetary policy. These methods enable us to examine the coherence and consistency between the CBRT’s discourses and policy stance with its declarations covering the period 2011:09 - 2019:12. Key variables are included that effectively explain the proxy for the central bank’s policy stance by mutual information measure for variable selection. The policy stance of the CBRT is classified by fuzzy C-means clustering within the scope of the rule-based fuzzy logic model. This analysis allows us to group the policy stance as loose, moderate, and tight. Within the analysis timeframe, the CBRT maintained a rhetoric of consistent tightness in statements regarding its monetary policy stance. However, the only overlap occurred between June 2018 and July 2019, when the policy stance declared by the CBRT and the model results aligned. In the remaining periods, the policy stance declared by the CBRT does not correspond with the model outputs.