Central Bank Of Turkey Research Articles

Forecasting the Turkish lira Exchange Rates Through Univariate Techniques: Can the Simple Models Outperform the Sophisticated Ones?

Forecasting the Turkish lira Exchange Rates Through Univariate Techniques: Can the Simple Models Outperform the Sophisticated Ones?

The asymmetric impact of real exchange rate misalignment on growth dynamics in Turkey

Earlier empirical studies examining the impact of exchange rate misalignment on economic growth were based on a symmetric approach, assuming that undervaluation and overvaluation affect economic growth symmetrically. However, recent empirical studies have shown that exchange rate misalignments asymmetrically affect economic growth. This study, therefore, examines the asymmetric effects of real exchange rate misalignments on economic growth in Turkey. The asymmetric effects of the non-linear autoregressive distributed lag model show that both overvaluation and undervaluation impede economic growth in Turkey. The study recommends that Turkey should maintain a market-based exchange rate policy to reduce currency misalignment. The study also recommends that the central bank of Turkey should intervene in the foreign exchange market for a short-term to mitigate the excessive distortions in exchange rates and avoid inefficiencies in resource allocation.

Wordle for Central Bankers: Separating Impact of Words and Actions Under High Inflation– The Case of Turkey

ABSTRACT This paper investigates the effectiveness of monetary policy in Turkey, i.e. a developing country with high inflation, through its impact on the local currency denominated sovereign yield curve. Employing a two-factor, market-based methodology and introducing a new dataset, the study calculates the surprise factor for both actions (monetary policy surprise) and words (communication surprise). Checking their impacts separately, the study finds evidence that the communication provided by the Central Bank of Turkey through Monetary Policy Committee Statements help to extend the impact of the monetary policy to the long end of the yield curve, even during periods of high inflation.

Inflation and a predictable pandemic, femicide: evidence from ARDL bounds testing approach from Turkey

Purpose- Although femicide has been an ongoing "problem" for centuries, it has started to attract the attention of researchers in recent years. Femicide has been explored in many ways, but its research from an economic perspective has been neglected. The main motivation of this study is the economic analysis of Femicide. The aim of this paper is to determine whether there is a correlation between inflation and femicide. Methodology- To achieve this, monthly data on Femicide in Turkey (case taken from We Will Stop Femicide Platform) and monthly inflation data from the Central Bank of Turkey (CBT) balance sheet for the period between 2013:01 and 2020:11 were tested using the Normal LM Test with two breaks, Enders and Lee (2012) Flexible Fourier Unit Root Test and ADF and PP unit root test, the ARDL Bounds Test Approach, and Error Correction (VECM). The VECM model has also been used to investigate the short-term relationship. Findings- According to the analysis's results, inflation and femicide have a long-term correlation. A rise in inflation of one unit was followed by an increase in femicides of 0.95 units, and it was demonstrated that a long-term variation between the variables approached each other by 47% in the subsequent era. Conclusion- Politicians should take note of the discovery that inflation and femicide are cointegrated and that inflation will increase femicide in the current inflationary process to avert these avoidable social and economic costs. These findings are of utmost significance to society, and this study, which is a first, adds to the body of literature. Keywords: Inflation, femicide, bounds testing, ARDL JEL Codes: E31, E58, I18, C01, D19

Gayrimenkul Yatırım Ortaklıkları Endeksi ve Sektör Endeks Getirisinin (XGMYO) Belirleyicileri: Türkiye Sermaye Piyasaları Örneği

This paper evaluates real estate investment trust (REIT) market and reviews the financial determinants of real estate investment trusts index. To this end, the study finds an answer to the research question of whether REIT index (XGMYO) is significantly affected by inflation, USD/TL parity and interest rates. Data is retrieved from Borsa-Istanbul and Central Bank of Turkey and covers the period from 2011 and 2021 (monthly data). Findings of the quantitative analysis are as follows; XGMYO has two regimes. Deposit (Index Return) with different lags is the most effective variable in both regimes. While CPI-Inflation is statistically significant in Regime 2, it is not significant in Regime 1. Similar to inflation, housing-loans-interest rate (applicable to clients) statistically has impact on XGMYO in Regime 2, but it has no statistically significant impact on Regime 1.

Managing Exchange Rate Volatility during Political Crises

The goal of this paper is to show how the exchange rate volatility could be managed during political crises, using as a case study the fragile
 the political relationship between USA and Turkey between 2014-2019. The Turkish Lira has dramatically dropped against the US dollar to a record low level in August 2018. The Turkish president accused the American president of economic war, insisting that his country would survive an economic assault, but neglecting to comfort financial markets (worried about the breakdown of the national currency of a crucial emerging economy). Meanwhile, investors feared that a financial crisis could spread throughout Europe. Fears of contagion remained high, although the central bank of Turkey pledged to provide liquidity for Turkish banks. In this background, this paper tries to find if different specifications of univariate GARCH models can anticipate volatility in the foreign exchange market. Our study uses estimates from a symmetric GARCH model, namely GARCH (1,1) for the TRY/USD exchange rate. The data set was obtained from “Investing.com” and covers
 the period January 2014 – to October 2019. This study shows that GARCH (1, 1) can be successfully applied in modeling and forecasting the volatility trend of the currencies and so in exchange rate administration.

Cost Of Inpatient Pediatric Type 1 Dıabetes Care In Turkey: Sıngle Center Experıence

Objective: To explore the financial cost of type 1 diabetic (T1D) children and adolescents during inpatient management for various reasons.
 
 Method: Ten years of electronic hospital records (2009-2018) of the pediatric ward were screened retrospectively and hospitalizations with a confirmed diagnose of T1D were analyzed. Costs are grouped as laboratory tests, clinical interventions, drugs, medical supplies, and total costs before being converted to US dollars according to the mid-year index published by the Central Bank of Turkey. Descriptive statistics and comparisons against patient-specific characteristics are presented.
 
 Results: There were 400 eligible cases. Cost per case for the hospital and for the Social Security Institution (SSI) were $268 and $309 respectively. The clinical intervention was the largest (49.84 vs 55.33 %) and that of medical supplies was the smallest (0.43 vs 0.55 %) component of the cost. Blood pH, HbA1c, having a single parent, and the number of days in the ward were parameters influencing total cost significantly (p

Merkez Bankası Bağımsızlığının Makroekonomik Göstergeler Üzerine Etkisi: Türkiye Örneği (1990-2018)

Central banks are the most important institutions that enable countries to implement monetary policy. Central bank autonomy is defined as keeping away from the pressures of the government while making and performing decisions on monetary policy. Existence of developed financial markets and being focused on price stability by monetary policy are among the essential conditions in terms of central bank autonomy. Monetary and fiscal policies should be determined and implemented so as to provide economic stability. Accordingly, it was aimed in this study to scrutinize the effects of autonomy of Central Bank of Turkey (CBT) on macroeconomic variables for the period of 1990-2018. It is concluded when the obtained data are analyzed that there occurs a positive impact by the guarantee of both legal and actual autonomy of CBT.

Threshold Regression Model for Taylor Rule: The Case of Turkey

This paper employs the structural threshold approach of Kourtellos et al. (2016) to examine various specifications of the Taylor rule model. Contrary to the previous work on the Taylor rule, this methodology allows for endogeneity of the threshold variable in addition to the right-hand-side variables suggesting a fully comprehensive flexible framework that does not rely on restrictive linearity and/or exogeneity assumptions. In order to examine the model, Turkey is selected as an inflation targeting developing economy, since its central bank (the Central Bank of Turkey) as argued by Dincer and Eichengreen (2014) has been one of the fastest improving central banks in terms of its transparency score. We use monthly data for the period of 2004-2018 that includes a number of historical episodes such as the global financial crisis as well as various internal political developments that may have had an impact on the fluctuations of the relevant macroeconomic variables as well as on the functional form of the inflation targeting Taylor rule specification. Empirical findings highlight the different reactions of the central bank in determining policy rate under different regimes.

COVID-19 and net foreign exchange reserve relationship in Turkey: evidence from ARDL bounds testing approach

Purpose- This work inquires whether there's a correlation between Covid-19 and the net foreign exchange reserve, which shows sensitivity to crises. Methodology- For this purpose, the daily data on COVID-19 seen in Turkey (case taken from Republic of Turkey Ministry of Health, cumulative case and infection rate data from Public Health Experts Association (HASUDER) and daily net foreign exchange reserve data calculated with the data obtained from the Central Bank of Turkey (CBT) balance sheet for the period between 11 March-14 May 2020 were tested applying the ARDL Bounds Test Approach and analyzed within the framework of the Error Correction Model (VECM). And to query short-run relationship, Granger Test over the VECM Model has been applied. Findings- According to the analysis result; There is a cointegration in the long-run between COVID-19 and the net foreign exchange reserve, and is statistically significant. Also, net foreign exchange reserve is a Granger cause for the quantity of cases, the cumulative quantity of cases, and the rate of infection in the short-run. Conclusion- In the process of transformation of a health crisis caused by a pandemic into a global economic crisis, this study contributes to the formation of the literature and is noteworthy with its results. Especially in the short-run, net foreign exchange reserves were determined to be a Granger cause of COVID-19, and therefore it was determined empirically that the change in reserves escalated the pandemic. The study is a contribution to the literature.

ANALYSIS OF RESTRUCTURING, AND RESCHEDULING OF THE DEBT

The paper investigates a semantic confusion about rescheduling and restructuring of a public debt. There issues are not related to the default. The rescheduling refers to the swap of debt towards long term and restructuring as a change in the denomination of the debt. The paper conducts empirical evidence for the swaps involved using the econometrics exercise. The findings of the paper are that a swap of short term replacing long term debt is continuously implemented by the central bank of Turkey. Lengthening the maturity of the debt seems to be covert policy of debt management. The paper reported that another covert policy is that bank often swap local debt for dollar or euro debt or change the currency issuance or restructure it. Even though, the bank is involved in these covert policies, the central bank is publishing this data and making no efforts for hiding such information. Thus, we assume that the rating agencies are aware about these debt transactions due to the fact that these transactions are conducted in market prices. The covert policies are good enough as they seems to be working and should be regarded as such without regard to their interest cost.

The Effects of the Macroprudential Policies on Turkish Banking Sector1

Purpose – The aim of the research is to test the effectiveness of macroprudential policies that contain different instruments and help to ensure financial stability in Turkey. Design/methodology/approach – The Central Bank of Turkey (CBRT) and the Banking Regulation and Supervision Agency (BRSA) implemented macroprudential policies such as active use of Debt to Income (DTI), Loan to Value ratio (LTV), required reserve ratios, capital requirement, foreign currency lending limits, credit growth limits, interest rate corridor in order to mitigate financial vulnerabilities. These effects have been analyzed and tested with the econometric time series methods in the paper. The data consist banking groups that are Turkish banking sector, deposit banks, development&investment banks. Results – Empirical findings show that tightening macroprudential policies reduce the loan growth of the Turkish Banking sector and deposit banks. However, the magnitude of this effect is relatively small. Unlike these findings, the effects of macro-prudential tools on the loan growth for the Turkish Development&Investment Banks are not significant statistically. Discussion – Aftermath of the global crisis, the new monetary policy, which doesn’t have traditional features, started to be implemented from the middle of 2010 and has been going on as of the beginning of 2019 in Turkey. Accordingly, the Central Bank of Turkey (CBRT) has determined financial stability as a goal in addition to price stability in the framework of the new monetary policy and it has carried out and developed new tools in accordance with this secondary objective. This application has been carried out in coordination with (BRSA). The new monetary policy of the CBRT and the macro-prudential policies of the BRSA mutually aimed to mitigate financial vulnerabilities and provide financial stability in Turkey. When we examine and interpret the empirical results, we can say that the macro-prudential policy tools affect a certain degree of credit growth in the whole banking system. However, this effect is not very strong.

The determinants of main stock exchange index changes in emerging countries: evidence from Turkey in COVID-19 pandemic age

With the emergence and spreading of COVID-19 pandemic all over the world, the uncertainty has been increasing for countries. Depending on this condition, especially emerging countries have been affected negatively by foreign portfolio investment outflows from stock exchanges, and main stock exchange indices have been collapsed. The study examines the causes of the main stock exchange index changes in Turkey in the COVID-19 period. In this context, 14 variables (3 global, 6 country-level, 5 market-level) are analyzed by employing random forest and support vector machine algorithms and using daily data between 01.02.2020 and 05.15.2020, which includes the pre-pandemic and the pandemic periods. The findings prove that (ⅰ) the most important variables are the retention amount of foreign investors in the equity market, credit default swap spreads, government bonds interest rates, Morgan Stanley Capital International (MSCI) emerging markets index, and volatility index in the pre-pandemic period; (ⅱ) the importance of variables changes as MSCI emerging markets index, the volatility index, retention amount of foreign investors in the equity market, amount of securities held by the Central Bank of Republic of Turkey (CBRT), equity market traded value in the pandemic period; (ⅲ) support vector machine has superior estimation accuracy concerning random forest algorithms in both pre-pandemic and pandemic period.

The Determinants of Main Stock Exchange Index Changes in Emerging Countries: Evidence from Turkey in COVID-19 Pandemic Age

With the emergence and spreading of COVID-19 pandemic all over the world, the uncertainty has been increasing for countries. Depending on this condition, especially emerging countries have been affected negatively by foreign portfolio investment outflows from stock exchanges, and main stock exchange indices have been collapsed. The study examines the causes of the main stock exchange index changes in Turkey in the COVID-19 period. In this context, 14 variables (3 global, 6 country-level, 5 market-level) are analyzed by employing random forest and support vector machine algorithms and using daily data between 01.02.2020 and 05.15.2020, which includes the pre-pandemic and the pandemic periods. The findings prove that (i) the most important variables are the retention amount of foreign investors in the equity market, credit default swap spreads, government bonds interest rates, Morgan Stanley Capital International (MSCI) emerging markets index, and volatility index in the pre-pandemic period; (ii) the importance of variables changes as MSCI emerging markets index, the volatility index, retention amount of foreign investors in the equity market, amount of securities held by the Central Bank of Republic of Turkey (CBRT), equity market traded value in the pandemic period; (iii) support vector machine has superior estimation accuracy concerning random forest algorithms in both pre-pandemic and pandemic period.

Monetary Policy, Uncertainty, and Domestic Shock Transmission to Capital Flow in Turkey

This paper reports findings on multiple important phenomena in capital flow literature: internal and external shock transmission to foreign direct investment and foreign portfolio investment. Operating on Turkey as a case study, I disaggregate quarterly gross capital inflows (FDI and FPI) and examine their time-varying responses to shocks in advanced economies' monetary policy and uncertainty surrounding it, Central Bank of Turkey's monetary policy, and several key domestic macroeconomic determinants. To this end, I employ a recently developed Structural Vector Autoregression technique that uses a data-driven non-Gaussian approach and find that FPI inflows are considerably more sensitive to permanent unexpected monetary policy shocks originating both at home and abroad. Complementary results from uncertainty metrics indicate-to varying extents-that Turkey is a beneficiary of capital flow amidst heightened policy tension in the US. I also visit the push-vs.-pull debate in capital flow literature via Forecast Error Variance Decomposition and discover that Turkey falls decisively in the pull category. The Turkey-specific indicators most crucial in attracting foreign capital are the performance of the currency and CBRT's policy positioning. Lastly, using signal-processing techniques in the time-frequency domain, I report that higher FPI inflows have generally led FDI inflows in times of global economic turbulence, but that phenomenon is undergoing a reversal in the recent past.

Misleading Aggregate Considerations in Sector-Specific Causalities: Long-term Bank Credit Usage in Fishing vs. Agriculture in Turkey

As an alternative source of financing the assets, bank credits have ever been on the spot of business finance and financial analysis. Those sources of financing have mostly compared with the short-term appearance of either liabilities or liquidity. The relevant finance literature ensures that the long-term appearance of bank credits in the balance sheets of businesses is not only affected by the composition of short-term liabilities but also the liquidity. Nevertheless, bank credit usage, especially in the long-term, may have different characteristics amongst sectors. Some sectors may even deserve a thorough analysis in their challenge of bank credit finance. The fishing sector and the businesses which it contains may have been neglected in terms of revealing the causalities which might have been hidden by considering its aspects as a supplement in the aggregate figures of the agriculture sector in Turkey. Thus, this study aims at the core debt and liability variables along with a liquidity control variable, cash and cash equivalents or cash, to reveal the causality and cointegration aspects on the long-term bank credit potential in the nexus of these two inter-related sectors. We hereby compare the results of the model designed for the study in between fishing and agriculture sectors in Turkey for the time span of available and comparable data which has been represented by the Central Bank of Turkey as a part of nonfinancial or real sector data from 1996 up to 2009. The findings depict that fishing sector, unlikely to agriculture sector in which it is generally added and forced to share the same investment atmosphere of incentives, policy implications, and attitudes of the creditors, does have different features in terms of long-term bank credit usage. Cash and cash equivalents are not significant regressors for the agriculture sector, however, fishing sector has evidence in the long-run that cash and cash equivalents have noteworthy impact in the long-term bank credits. The results of the study will therefore help both the decisions on the creditors’ and fishing sector sides enriching the profound details and sector specific reasoning for which an aggregate point of view where fishing sector is seen as a part of agriculture sector could not reflect the sector’s characteristics on the path to develop the fishing sector and the businesses therein. We also believe that this study will present evidence for any policies and incentives in promoting new investments in the fishing sector of Turkey.

Monetary Policy and Exchange Rates Pre- and Post-Global Financial Crisis: The Case of Turkey

The aim of this study is to investigate the association between monetary policy and exchange rates in Turkey for two periods: Pre (December 2001-December 2007) and Post (January 2010-January 2016) global financial crisis (GFC). The ARDL, FMOLS, CCR and DOLS models are used to achieve the objective of this study. The results show that there is a significant impact of monetary policy, namely money supply and short-term interest rates, on exchange rates in Turkey before and after the GFC. The results suggest that the Central Bank of Turkey affected exchange rates after the GFC more than before the GFC.

Erosion of Central Bank independence in Turkey

ABSTRACTThis study provides empirical analysis to show increasing pressures over the Central Bank of Turkey (CBT) throughout the past decade where the CBT gives into such pressures, despite the Central Bank Law, which ensures tool independence. The study suggests that the relations between the government and the CBT reflect recent political changes where the government increased its control over state institutions, following rising costs of losing office. However, this trend not only has economic costs such as a restricted capacity to achieve price stability and sustainable growth but it also limits horizontal accountability of state institutions.

The role of the AFA coefficient as a new criterion in the long-run liaison between corporate liquidity and bank credit

PurposeThis paper aims to focus on the absence of a direct criterion for the ideal level of net working capital (NWC) for which Acikgoz (2014) theoretically demonstrates that this NWC can be treated in a manner that allows the assessment of repayments. The study presents and discusses a new multiplier (i.e. the afa coefficient), defined as the ratio of cash equivalents ratio to NWC, measured as the percentage of short-term liabilities (Acikgoz, 2014). In other words, the study explores whether NWC could be an indicator of the ratios of corporate short-term bank credit to STL and of bank credit to total assets.Design/methodology/approachSectoral panel regressions are used in the case of Turkey, spanning the period 1996-2013, on data obtained from the Central Bank of Turkey. Through second-generation panel unit root tests for cross-section dependence and panel cointegration methodologies, the results illustrate the statistical significance of the CD statistics, indicating the presence of cross dependence, the presence of non-stationary variables and the presence of a long-run association for the variables under study.FindingsThe findings document that a transformed variable of NWC is more substantive than the explicatory quality of the current ratio and may potentially be used in the prediction of bank credit in corporate liabilities.Originality/valueThe afa coefficient shows the ratio of liquid assets to NWC as a percentage of STL. The results illustrate that this coefficient plays a significant role for corporate bank credit usage in the case of the Turkish sectoral analysis.

Business model of Islamic banks in Turkey

PurposeThe purpose of this paper is inductively identifying the business model of Islamic (participation) banks in Turkey via using bank characteristics, meaning balance sheet ratios.Design/methodology/approachThe methodology starts from bank characteristics and ends with identification of bank business model according to these characteristics under the assumption that there is one single business model (say Model A) for all Turkish Islamic banks. What the author aims to find is the properties of this business model. Regarding the method, seven bank characteristics from liability side and five characteristics from asset side of bank balance sheets were established. While representing these characteristics, the author uses charts and tables. Necessary data are gathered from the Central Bank of Turkey. Time frame of monthly data is from December 2005 to March 2015. In total, there are 1356 observations.FindingsValue proposition of business model of Turkish Islamic banks depends on participation in collecting funds. In terms of customer segmentation, there is dominance of private sector. While using the funds, the main preference is loans, meaning that value proposition depends on loan products, especially murabahah. Thus, revenue streams depend on mark-up. Overall, business model of Turkish Islamic banks seems similar to traditional banking based on intermediation with some peculiarities. There are also some evidences which can be interpreted as signs toward decline in this traditional role like decrease in deposits, increase in funds from financial institutions and decrease in loans.Practical implicationsIt can be said that original idea of participation banks has been followed on the liability side of Turkish Islamic banks. However, decrease in deposits recently needs detailed investigation to create convenient policies especially by Islamic banks. Similar investigation and policy creation is needed also for the developments of increase in funds from financial institutions and decrease in loans. Furthermore, as the original idea of participation is not followed by business model of Turkish Islamic banks, rethinking and acting is needed in that regard.Originality/valueMain contributions of this paper are as follows: first, it fills a gap in the field where studies regarding business model of Islamic banks are scarce. Second, it fills a gap in literature of Islamic banking in Turkey where most of the studies are about development or jurisprudence of Islamic banks. Third, it provides a decade-long evidence regarding business model of Islamic banks in Turkey. Fourth, the findings provide an initial step for the construction of a business model canvas for Turkish Islamic banks. Fifth, discussion of findings leads to number of important questions which can pave the way for new research studies.