Central Bank Of The Republic Of Turkey Research Articles

Evaluating the Efficacy of Monetary Policy in Driving Economic Growth in Turkey

This paper examines the efficacy of monetary policy in fostering output growth in Turkey by analyzing annual time-series data sourced from the Central Bank of the Republic of Turkey (CBRT) spanning from 2005 to 2023. The research employs the Autoregressive Distributed Lag (ARDL) bounds testing procedure. The findings reveal that money supply, considered an indicator of monetary policy in the context of this study, exerts a positive and statistically significant influence on output growth in Turkey in both the short and long term. Additionally, government expenditure has a positive and statistically significant impact on growth in the long term, albeit weaker than the impact of money supply. Lastly, in the long term, inflation negatively affects growth, with statistical significance observed at the 10% level.

Green central banking under high inflation—more of a need than an option: An analytical exposition for Turkey

AbstractMotivationCalls for a green monetary policy are intensifying as the climate crisis deepens. Although the leading central banks of low‐inflation countries are the spokesmodels of this discussion, considerations of green central banking under high inflation continue to lag. The motivation of this article is to contribute to this process with a working example from Turkey—an economy under severe inflationary pressure.PurposeOur first objective is to document the risks associated with climate change for the Central Bank of the Republic of Turkey (CBRT) in terms of its main mandate of price stability and to provide evidence to pursue green policies. We next examine the feasibility of a green monetary design under high inflation.Methods and approachWe scrutinize the duties and responsibilities of the CBRT as set by law and set out the armoury it would have at its disposal in pursuing a green monetary policy. Exhibiting climate change‐related risks to its mandate(s), we find one climate policy‐related and two mandate‐related reasons for the CBRT to go green, matching them with robust green instruments.FindingsAdopting a green monetary policy has the potential to improve the CBRT's ability to reach its objective of price stability. Indicating that green central banking in a high‐inflation country is more of a need than an option, we also document that greening of the monetary policy does not necessarily conflict with the broad mandates of inflation targeting and financial stability.Policy implicationsEvidence from Turkey supports the greening of the CBRT. This call is both feasible in terms of its capabilities and critical as regards fulfilling the mandate. Furthermore, by exposing carbon bias in the country's loan portfolio, our findings support aligning monetary policy with emissions‐abatement instruments, thus contributing to the overall design of Turkey's climate policies.

Evaluation of the Impact of the Covid-19 Pandemic on Consumer Spending in Turkey by Structural Break Analysis

The purpose of this study is to investigate and evaluate the impact of the global Covid-19 crisis on consumer spending tendencies in Turkey. The data of the study, which are weekly data, consists of the "Debit Card and Credit Card Expenditure" amounts of the Central Bank of the Republic of Turkey (CBRT) for the period 6/3/2015–5/8/2022. Changes in consumer expenditures during the Covid-19 pandemic process were examined with the help of structural break tests. The main contribution of this article subsists in an empirical study to examine structural breaks in Turkey using personal debit and credit card disaggregated total expenditure data during the Covid-19 period. According to the research findings; the change observed at the beginning of the Covid-19 period in card expenditures is less than the change observed at the end of the period. With the end of the pandemic, an upward breakout was observed in most of the expenditure items.

DYNAMICS OF OPTIMUM MONETARY POLICY IN A SMALL OPEN-ECONOMY: A NEW-KEYNESIAN DSGE MODEL FOR TURKISH ECONOMY

The purpose of this paper is to investigate the sources of business cycle fluctuations in a small open economy (SOE) using dynamic stochastic general equilibrium (DSGE) models and to assess the path of optimal policy decisions taken by the Central Bank of the Republic of Turkey (CBRT). To that purpose, the SOE-DSGE model is estimated using the Bayesian technique with Turkish data spanning the quarters 2003Q2–2020Q1. Based on the estimated model, the study finds that the explanatory power of the SOE-DSGE model for household, firm and central bank behavior decreases when consumer habit formation, price indexation and exchange rate sensitivity are included. Furthermore, technology, preferences, and risk premium shocks all have a significant impact on the Turkish economy. The CBRT, on the other hand, was principally concerned with price stabilization, interest rate smoothing, output and output growth stabilization, and nominal exchange rate stabilization, respectively. More importantly, the optimal monetary policy function implies that output growth should be better stabilized if exchange rate sensitivity target is ignored.

Effectiveness of Unconventional Monetary Policy Tools on Financial Stability: A NARDL Approach for Turkey

The primary purpose of central banks is to achieve and maintain price stability. Until the global financial crisis in 2008, it was accepted that financial stability was achieved in an economy where price stability was achieved. However, after the crisis, it was seen that financial stability could not be achieved in economies where price stability was achieved, and alternative policies began to be sought. In this context, many developed and developing countries have started using unconventional monetary policy tools to ensure financial stability along with price stability. As a result of the expansionary policies implemented by the central banks of developed countries, there has been an intense capital inflow to Turkey, which has led to credit expansion and overvaluation of the domestic currency. Therefore, as of 2011, the Central Bank of the Republic of Turkey (CBRT) started to use non-traditional monetary policy instruments to support financial stability. In this study, a financial stability index has been calculated for the Turkish economy and the effects of interest rate corridor and required reserve implementations on this index were examined with the Non-Linear Auto Regressive Distributed Lag (NARDL) model. According to the results of the analysis, it has been understood that the effects of unconventional monetary policy tools in ensuring financial stability are limited and monetary policy implementations alone are insufficient.

Interest-Free Finance Model by Using Blockchain-Based Company Tokens: Research on Digital Turkish Lira (DTL) and Borsa Istanbul with Technology Acceptance Model (TAM)

Since technology benefits people in many areas, its effectiveness is increasing day by day. For this reason, many products and services have been digitized and made available to people. Especially in the last period, with the development of blockchain technology, there has been a significant change in the financial sector. Blockchain technology, which offers a decentralized transaction network, has contributed significantly to the development of digital currencies. In this context, the Central Bank of the Republic of Turkey (CBRT) started to work on Digital Turkish Lira (DTL) in 2021. In this context, it will enable the company tokens, which are proposed to be issued as a sub-unit of DTL, which is planned to use blockchain technology in its infrastructure, to be used in the financing of businesses, while also allowing investors to invest in Turkish Lira assets. In the research, it has been suggested that the company tokens to be issued under DTL can be traded on the Borsa Istanbul (BIST) and invested, as well as the relevant tokens can be traded. The proposed model has been examined within the scope of the Technology Acceptance Model (TAM), which is frequently used in the research of technological innovations. The analysis process of the research was carried out with Structural Equation Modeling (SEM). The analysis of the research was carried out with the Smartpls 3 package program. Hypotheses H3, H5, and H8 were rejected and other hypotheses were accepted. When the results of the research were analyzed, it was determined that the factors affecting the intention to use the proposed company tokens were parallel to the literature. As a result of the analysis, it has been reached that the attitude and intention towards the use of company tokens in the proposed model are positive.

THE INFLUENCE OF MONETARY POLICY ON HOUSING MARKET: EVIDENCES FROM TURKEY

Purpose: Nowadays, the changes in the level of economic activities in the housing market are accepted as the most important signal of macroeconomic performance. This situation brings about the need to give importance to the investigation of policy implementations that affect economic activity in the housing market. So, this study aims to find out the effects of changes in the monetary policy on housing prices in Turkey as a sample of developing country. Design/methodology/approach: This study employed Augmented Vector Autoregression (VAR) analysis. For housing prices; the Housing Unit price series, calculated by the Central Bank, spanning 2010M1-2016M3 are used. Housing unit price is calculated by Housing price per square meter. To represent production volume, the index of total industrial production has been used. To represent inflation series, CPU (Consumer Price Index) series have been used. The data has been taken from CBRT (the Central Bank of the Republic of Turkey) and TUIK (Turkish Statistical Institute). Findings: Results show that policy interest rates are important indicators for the related term?s housing prices and it can also be said that the housing price channel has partially been effective. Accordingly, results determined that monetary policy had a significant effect on housing prices in Turkish housing market. Originality/value: This study supports the argument that monetary policy has a significant effect on housing prices in developing countries like Turkey.  

Relationship between Covid-19 and money supply in Turkey: evidence from ARDL bounds testing approach

Purpose- COVID-19 has been a devastating process. During this period, there was a significant increase in the money supply. So, in this process, is there a relationship between COVID-19 and the money supply? This study intends to investigate if COVID-19 and the money supply have both a short- and long-term relationship. Methodology- Logarithmic conversions were used to examine the number of COVID-19 new cases obtained from the Association of Public Health Professionals (HASUDER) and the Turkey Republic Ministry of Health, as well as M2 weekly money supply data from the Central Bank of the Republic of Turkey (CBRT) Electronic Data Distribution System (EVDS). For stationarity tests, the Augmented Dickey-Fuller (ADF), Phillips Perron (PP), and Kwiatkowski, Phillips, Schmidt, and Shin (KPSS) unit root tests were used. Due to the different degrees of stationarity of the series, cointegration was not possible, so the long-term relationship was evaluated using Autoregressive Distributed Lag (ARDL). Short-term analyzes included the VAR Model and the Granger Causality Test. Findings- COVID-19 and the money supply, according to the findings, are not cointegrated in the long term. It has been discovered that the series do not move together over the long run. But in the short term, COVID-19 is a Granger cause of the money supply. Conclusion- The increase in COVID-19 cases positively affects the money supply. An increase in the money supply also leads to inflation. Therefore, in order to cope with the inflationary process triggered by the pandemic, measures to prevent the increase in COVID-19 cases are important. These findings will be "confirming" in the design of policies in this process. This study is also a contribution to the literature due to the lack of studies investigating the response of the money supply to COVID-19. Keywords: Covid-19, money supply, ARDL bounds testing approach, VAR model, Granger Causality. JEL Codes: E51, E52, I15, I18, C22

THE ELASTICITY OF EXPORTING THE MINING QUARRYING PRODUCTS TO FOREIGN EXCHANGE RATE CHANGES

Elasticity examining the exporting the products to foreign exchange rates, has been subject to so many studies. Exports are expected to increase in the case of the depreciation of the domestic currency in the economies where exports and imports are sensitive to foreign exchange rate. While foreign currency appreciation increases the profitability of the firms also increases because their costs are in domestic currency. This paper investigates how exchange rate changes affect mining & quarrying exports in Turkey. In this paper we aim to identify the elasticity of mining & quarrying exports to dollar exchange rate changes. Mining & quarrying whose development are mostly dependent on nature sector exports which is predominantly sensitive to the dollar exchange rate, was tried to be analysed by using the least squares method. Data representing the exchange rate for monthly average dollar-selling prices between the years of 2005-2017, obtained from the data system of the TCMB (The Central Bank of the Republic of Turkey) is used. In addition this, export data denominated in dollars for mining & quarrying products for the same period, were also obtained from the TUIK (Turkish Statistical Institute). Data obtained from those for 156 periods were analysed through the SPSS statistical packaged software program. As a result, mining & quarry exports are sensitive to the dollar exchange rate and a 1% increase in dollar exchange rate increases mining & quarrying exports by approximately $ 8,8 million. Besides this result, a one percent (1%) standard deviation increase in dollar exchange rate leads to a 0.65 standard deviation increase in exports of mining & quarrying products. These findings are consistent with the literature on elasticity to foreign exchange rate changes.

A Comparative Analysis of the Real Sector in Turkey from the Economic and Financial Perspectives with the CRITIC-MAIRCA Method

This study aimed to examine the economic contribution and financial performance of the real sector in Turkey. Using the real sector company accounts published by the Central Bank of the Republic of Turkey (CBRT), seventeen sectors were analysed with the CRITIC-based MAIRCA method. The economic contribution was evaluated with sub-indicators to economic growth, employment, and entrepreneurship; financial performance was evaluated with liquidity, financial structure, turnover and profitability indicators. The findings revealed that manufacturing sector provided the highest contribution to total economy and in all sub-indicators. While the sectors with the lowest contribution in the sub-indicators differed, it was determined that the sub-sector with the lowest total contribution was real estate activities sector. In terms of total financial performance and liquidity, financial structure, and profitability sub-indicators, human health and social work activities, and according to turnover ratios energy supply sector have the highest performance. The study revealed that the sectors with an increased contribution to the economy and those with high financial performance differentiate. Lastly, it has been seen that sectors with high economic contribution exhibit weak financial performance. The findings were checked by sensitivity analysis and proposed method produces consistent results against weight changes and the model is reliable.

Convenient prices and cash usage

ABSTRACT In the decision to use cash instead of an alternative payment method, quite a few factors influence consumers’ choice and the driving forces behind the cash payment preference are associated with two main topics: the socio-demographical factors of consumers and the characteristics of the payment method. However, beyond these factors pricing behaviour is also a crucial factor that affects the consumers’ cash payment preference. This study aims to examine the impact of convenient prices on cash usage behaviour in Turkey by using the micro-level data of the Methods of Payment Survey carried out in 2020 by the Central Bank of the Republic of Turkey (CBRT). Results show that the likelihood of cash usage increases in convenient prices, and it decreases for the amounts for which the individual receives a coin change. The results also show that the consumers’ cash usage decreases with the transaction amount, which shows that cash is preferred mostly in low-value transactions. Alongside the low-value payments primarily paid in cash, an important finding of the study shows that the likelihood of consumers’ cash usage increases with the amounts that match the currency denomination.

Analysis of the Effects of the Central Bank’s Interest Announcements on Tourism Index Returns

This paper examines the impact of interest rate announcements by the Central Bank of the Republic of Turkey (CBRT) on Borsa İstanbul tourism index returns. During the period covering 2010-2020, the effects of the CBRT's 20 decrease announcements and eight increase announcements on tourism index daily returns were examined separately using the event study method. Moreover, the BIST100 index was analysed for comparison purposes. According to the study results in which ARs were calculated with the mean adjusted return model, out of 20 announcements of decreases in the interest rate, only 3 showed statistically significant ARs on the event date. This result indicates that tourism investors’ reactions to policy rate announcements are weak and suggests the policy rate does not affect tourism investors' reactions. The findings for the BIST100 support this idea.

TÜRKİYE’DE PARASAL AKTARIM MEKANİZMASININ ETKİNLİK ANALİZİ

The Central Bank of the Republic of Turkey (CBRT)’s main target was price stability until the 2008 global crisis, it also focused on financial stability in the post-crisis period. CBRT has implemented new monetary policies that would react against shocks apart from traditional practices to limit the negative effects of the crisis since the end of 2010. The aim of this study is to analyze the effectiveness of the transmission channels of the monetary policies implemented by CBRT, comparing the traditional and new monetary policy periods. In this study, the effectiveness of the change in the monetary policy of the central bank in achieving the stability goals through credit and exchange rate transfer channels was compared as of 2002-2011 and 2011-2020 periods. The structural VAR (SVAR) model was used in the analysis since it allows the structural changes of variables based on economic theory. According to the findings, the effect of credit and exchange rate channels on inflation in 2002-2011 is compatible with the expectations. It was found that interest rate is the most important determinant of the fluctuations in credits and exchange rates. In 2011-2020, the effect of the transmission mechanism of credit and exchange rate channels over interest rates on inflation is compatible with the expectations. The majority of the variations in credits and exchange rates originated from the interest rates. Most of the fluctuations in inflation are caused by exchange rate and credit fluctuations, and the explanatory power of the exchange rate is relatively high.

Banking Soundness Index for Turkey: The Principal Component Analysis Approach

This study aims to generate a banking soundness index by utilizing endogenous variables specific to banks in order to measure the banking sector’s financial soundness. The core set of the financial stability index of the International Monetary Fund (IMF) is taken as the basis and the calculations of the proposed index are made with the quarterly data over the period 2007:Q2-2020:Q3. The variables in the sub-indicators are standardized using the min-max normalization technique. The principal component analysis method is employed on the standardized data. According to the results of the principal component analysis, variables are categorized into two main components. A strong relationship exists between profitability and liquidity ratios in the first principal component. In the second principal component, it is observed that market risk and certain capital adequacy ratios are associated with each other. The index reached its highest level in 2007:Q2. It is observed to reach its lowest levels in 2015:Q3 and 2020:Q1. It is seen that the calculated banking soundness index complies with the evaluations about the banking sector included in the financial stability reports published by the Central Bank of the Republic of Turkey (CBRT).

BASEL III REGÜLASYONUNU TAMAMLAYICI BİR LİKİDİTE STRES TESTİ METODOLOJİSİ: TÜRKİYE UYGULAMASI

Basel III liquidity regulation introduced two new metrics with a focus on time horizons up to 30 days (LCR: Liquidity Coverage Ratio) and beyond one year (NSFR: Net Stable Funding Ratio) respectively. This paper bridges the horizon gap by applying a yearlong liquidity stress test to the implied cash flow data of the seven biggest Turkish banks to gauge the extent (from 1 to 365 days) to which they can withstand a country-specific liquidity crisis. At the same time, this is the first study that has revealed the survival horizons of banks after a liquidity stress test at the institutional level. Results show that all banks fail each of the eight Turkey-specific liquidity stress scenarios (with a single exception) even under various Central Bank of the Republic of Turkey (CBRT) supports while complying with both LCR and NSFR ex-ante. As such, regulators would be better off employing the framework as a complementary local tool to the global Basel III liquidity regulation in order to account for medium-term liquidity risks between 30 days and one year. And therewithal, central banks could also use the results to draw up a contingency funding plan by reconsidering their hypothetical reactions to a liquidity crisis.

The deterioration in credibility, destabilization of exchange rate and the rise in exchange rate pass-through in Turkey

The early literature on inflation targeting (IT) regime argues that adopting an IT regime in itself reduces the exchange rate pass-through (ERPT). The basic logic behind this argument is that pursuing a credible and independent monetary policy will help to anchor the inflation expectations and stabilize the exchange rate volatility. In this study, we investigate whether the ERPT has increased in the last decade in Turkey where the credibility of the Central Bank of the Republic of Turkey (CBRT) has deteriorated and the exchange rate uncertainty has increased due to the weakening of commitment to inflation after political pressures although the IT regime has been implementing. Employing the Phillips curve model and then applying a narrowing window analysis, we have found that the ERPT coefficient increased as the beginning of the sample approaches towards the last observation, especially since 2011. To search for the reason behind this increase, we additionally employed a threshold regression method following the work of Murase (2013) which allows both possibility of non-linearity in the ERPT relationship and exogenously adding the threshold variable to the model. When the gap between inflation expectations and the inflation forecasts grows, then the credibility is considered to decrease and we found that the ERPT gets higher if the gap exceeds a certain threshold. Similarly, we have found evidence supporting that the ERPT coefficient was higher when the exchange rate uncertainty exceeded a certain threshold.

Semantic Analysis of the Central Bank of the Republic of Turkey Communication Reports and Forecasting Model with LSTM

In this research, a statistical system is designed to understand, interpret, and quantify the reports issued by the Central Bank of the Republic of Turkey (CBRT), an institution that also drives expectations and shapes the market to all agents are related to them. The corpora are CBRT's summaries of monetary policy committee meetings (SMPCM hereafter) published as official press releases. These summaries have three parts: inflation developments, factors affecting inflation, monetary policy, and risks. The graphical representation of items counted and words used shows they ripple together with business cycles. Later, the corpora under these three categories are evaluated according to their sentiment scores. After obtaining them, a Long-Short Term Memory Network is established to derive a quantitative model in order to forecast the sentiment score of each SMPCM, which will be issued in the near future. The LSTM model provides 93% accuracy to estimate semantic scores of SMPCMs.

The causal linkage between inflation and inflation uncertainty under structural breaks: Evidence from Turkey

AbstractThe goal of this paper is to examine the relationship between inflation and inflation uncertainty for Turkey through monthly data spanning the period 2004:01–2019:12. To this end, the paper first builds the inflation uncertainty series using inflation data. Second, it examines the cointegration relationship between inflation and inflation uncertainty. Finally, it searches for causal relationships between inflation and inflation uncertainty. The paper employs econometric methods which explicitly consider structural breaks. After examining the inflation–inflation uncertainty nexus for the whole sample, the analysis also investigates this relationship in two subperiods, i.e., 2004:5–2010:10 and 2010:11:2019:12 considering the change in the monetary policy framework of the Central Bank of the Republic of Turkey (CBRT). The findings provide evidence that there exists unidirectional causality running from inflation to inflation uncertainty for both the whole sample and the second subperiod, while there is no causality between inflation and inflation uncertainty for the first subperiod. Overall, the results show that during the second subperiod (i) when the CBRT tried to achieve not only price stability, but also financial stability and (ii) when the inflation rate is more volatile and higher, the increase in the inflation rate results in an increase in inflation uncertainty.

FED ve TCMB Politika Kararları Arasındaki Stratejik Etkileşimin Testi: Toda-Yamamoto Yaklaşımı

This study is based on analyzing a strategic interaction situation between Federal Reserve Bank(FED) and Central Bank of the Republic of Turkey(CBRT) policy decisions. In this context, our study analyzes whether the policies implemented by the CBRT are affected by the policy decisions of the FED through a theoretical leader-follower relationship. For this, the interaction game between FED and CBRT is theoretically modeled. The hypotheses proposed in the model were tested using the Toda-Yamamoto approach for the 2006M01-2020M12 periods. Findings show that the game is theoretically the leader of the FED and a leader-follower situation arises between the FED and the CBRT.

Türkiye de Kredi Büyümesinin Belirleyicilerinin Zamanla Değişen Nedensellik Testiyle Analizi

Although credit growth has been the main driver of financial development and economic growth in recent years, the factors affecting credit growth cannot be said to be sufficiently understood. This study examines which economic factors determine credit growth, which is an important part of the financial system in Turkey. Econometric estimates for the 2006Q1-2019Q4 period are based on Toda and Yamamoto (1995) and Hacker and Hatemi-J (2006) causality tests. However, our approach takes into account the time-varying causality. In addition to the variables related to the banking sector, the variables representing the country's macro-economic and monetary policy conditions, and foreign demand and global liquidity conditions are examined as determinants of credit growth. It is determined that GDP growth rate and inflation rate, which are among macroeconomic variables, lead credit growth, but less frequently causality relationship is from public debt to credit growth. Regarding monetary policy, causality from money supply to credit growth is more uncertain than Central Bank of the Republic of Turkey (CBRT) interest rates. Similarly, periodic causality relationships are observed from the variables of US federal funds, capital inflows, and exchange rates, which represent foreign demand and global liquidity conditions, to credit growth. These findings clearly show that causal relationships between credit growth and its determinants are time-varying. Therefore, it is revealed that policies towards the stability of credit growth require a dynamic design.