Abstract
Along with most other central banks, Turkey’s central bank has implemented unconventional policies since the 2007/2008 financial crisis. Financial stability has been one of the targets of these macroprudential policies. However, since Turkey is working toward this goal without increasing its inflation rate, tracking only short-term interest rates to measure this policy’s effectiveness would be inefficient. In this paper, we provide empirical evidence from Turkey that interbank interest rate volatility can be an additional tool for monetary policy makers to help achieve the goal of financial stability. Impulse responses generated from the VAR models indicate that interest rate volatility increases interest rates, depreciates domestic currency and decreases credit growth and output. Its statistically insignificant effect on prices is open to interpretation.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.