The Importance of Harmonious Monetary and Fiscal Policies: An Examination upon Credit Interest Rate in Turkey

Year 2019, Volume: 1 Issue: 2, 88 - 102, 30.04.2019

Mustafa Tevfik Kartal

https://doi.org/10.38009/ekimad.521421

Abstract

High bank
interest rates have been one of the main problems in certain periods for
Turkey. When development trend of interest rates is examined, it is seen that interest
rates were high in the past, they decreased between 2002 and 2010, and they
have been increasing after the year 2011. In order to reach low bank interest
rates, monetary and fiscal policies are the main tools that can be used. Therefore,
usage of monetary and fiscal policies in a harmonious way has substantial importance.
Within this context, this study is prepared to evaluate the recent experience
of Turkey in terms of harmonious monetary and fiscal policies. In this context,
the period after 2010 is included and the period after 2016 is focused especially.
Hence, recent approaches and practices in Turkey in terms of the harmonious
policy are examined.

As a result of
the study, it is determined in the study that tight monetary policy and loose fiscal
policy are applied generally in Turkey. However, monetary and fiscal policies have
begun to be harmonious with the last quarter of 2018. In this context, credit interest
rate of banks has been decreasing with the last quarter of 2018 which was increasing
since 2017. This shows that harmonious policies are so important that low bank
interest rates cannot be reached without the practice of harmonious policies.
This is the most important point that should be stated. Therefore, if it is
desired to reach low credit interest rate of banks, it is highly recommended
that Turkey should always adopt harmonious monetary and fiscal policies.

Keywords

Banking, Interest Rate, Harmonious Monetary and Fiscal Policies, Turkey

References

• Akıncı, M., & Yılmaz, Ö. (2016). The trade-off between Inflation and Interest Rate: A Dynamic Least Squares Method for Turkish Economy in the Context of Fisher Hypothesis. Sosyoeconomy, 24(27), 33-56.
• Akkaya, Y., & Gürkaynak, R. S. (2012). Current Account Deficit, Budget Balance, Financial Stability, and Monetary Policy: Reflections on a Gripping Episode. Economics, Business Administration and Finance, 27(315), 93-119.
• Altunöz, U. (2018). Which one is Right? Monetarists or Keynesians? The Effectiveness Analysis of the Monetary and Fiscal Policy for Turkish Economy. Journal of International Social Research, 11(56), 695-708.
• Atgür, M., & Altay, O. (2015). Relationship between the Inflation and Nominal Interest Rate: The Case of Turkey (2004-2013). Journal of Management & Economics, 22(2), 521-533.
• Aytaç, D., & Sağlam, M. (2014). Relationship among Public Deficits Domestic Debt and Interest Rate: Turkey Case. Eskişehir Osmangazi University Economics and Administrative Sciences Journal, 9(1), 131-148.
• Bozkurt, C., & Göğül, P. K. (2010). Coordination of Monetary and Fiscal Policies. Journal of Academic Researches and Studies, 2(2), 27-44.
• BRSA. (2018). Turkish Banking Sector Main Indicators as of 2018 September, http://www.bddk.org.tr/ContentBddk/dokuman/veri_0023_05.pdf, 02.12.2018.
• CBRT. (2018a). EVDS (Data Central). https://evds2.tcmb.gov.tr/index.php?/evds/serieMarket, 28.12.2018.
• CBRT. (2018b). Central Bank Interest Rates. https://www.tcmb.gov.tr/wps/wcm/connect/en/tcmb+en/main+menu/core+functions/monetary+policy/central+bank+interest+rates, 05.12.2018.
• Cukadar, P. Ö., & Algan, N. (2018). Institutional Change and Economic Policy Coordination for Turkey. Business & Economics Research Journal, 9(3), 513-529.
• Çoban, H., & Deyneli, F. (2014). Economic Coordination and Overview of Economic Coordination Committees in Turkey. Journal of Economic and Social Researches, 10(1), 13-26.
• Demir, M., & Sever, E. (2008). The Effects of Public Domestic Debt on the Rate of Growth, Interest and Inflation. Electronic Journal of Social Sciences, 7(25), 170-196.
• Dinçer, H., Hacıoğlu, Ü., & Yüksel, S. (2016). Performance Assessment of Deposit Banks with CAMELS Analysis Using Fuzzy ANP-MOORA Approaches and an Application on Turkish. Asian Journal of Research in Business Economics and Management, 6(2), 32-56.
• Doğan, B, Eroğlu, Ö., & Değer, O. (2016). The Causal Relationship between Inflation and Interest Rates: The Case of Turkey. Çankırı Karatekin University Journal of the Faculty of Economics and Administrative Sciences, 6(1), 405-425.
• Durgut, D. (2010). Macroeconomic Factors Influencing Interest Rate: An Empirical Analysis for Turkey. Zonguldak Karaelmas University, Master Thesis.
• Düzgün, R. (2010). Effectiveness of Monetary and Fiscal Policies in Turkish Economy. The Journal of International Social Research, 3(11), 230-237.
• Ekinci, E. B. M., Alhan, A., & Ergör, Z. B. (2016). Nonparametric Regression Analysis: Examining the Relationship between Interest Rate, Inflation and Exchange Rate. Banking and Insurance Research Journal, 2(9), 28-37.
• Ekonomihukuk. (2018). What is Fiscal Policy? Tools, Purposes, Applications. https://ekonomihukuk.com/maliye/maliye-politikasi, 25.12.2018.
• Erer, E., Erer, D., Çayır, M., & Altay, N. O. (2016). The Effects of Monetary Policies by CBRT, FED and ECB on Turkish Economy: An Analysis for 1994-2014 Period. Socioeconomic, 24(3), 285-305.
• Erol, İ. (2014). Global Financial Crisis, the Monetary Policy and Islamic Banks. Gift toProfessor Naci Birol Muter. https://www.researchgate.net/profile/Evrim_Kabukcu/publication/318300104_Cok_Uluslu_Sirketlerin_Yerel_Ekonomik_Gelismeye_Inovatif_Katkilari/links/596155a30f7e9b8194578520/Cok-Uluslu-Sirketlerin-Yerel-Ekonomik-Gelismeye-Inovatif-Katkilari.pdf#page=229, 02.12.2018.
• Ersin, İ., & Duran, S. (2017). Faizsiz Finans Döngüsünü Oluşturma Açisindan Adil Ekonomik Düzen Söyleminin Kredileşme İlkeleri Ve Uygulanabilirliğinin Değerlendirilmesi. Electronic Turkish Studies, 12(8).
• Gökalp, B. T. (2016). The Effect of Monetary Policy Decisions on Stock Prices. Suleyman Demirel University Journal of Faculty of Economics & Administrative Sciences, 21(4), 1379-1396.
• Gül, E., Ekinci, A., & Özer, M. (2007). The Causal Relationship between Interest Rates and Exchange Rates in Turkey: 1984-2006. Journal of Economic, Management and Finance, 22(251), 21-31.
• Günaydın, İ., & Eser, L. Y. (2012). Is an Independent Fiscal Policy Committee Feasible? Journal of Fiscal, 163, 36-60.
• Kartal, M. T. (2018). New Player to Turkish Financial Markets: Turkey Product Specialized Exchange’s Role and Potential Contributions. 5. International Social Humanities and Administrative Sciences Symposium, Abstract Book, 209-210.
• Kartal, M. T., İbiş, C., & Çatıkkaş, Ö. (2018). Adequacy of Audit Committees: A Study of Deposit Banks in Turkey. Borsa İstanbul Review, 18(2), 150-165.
• Kaya, E. (2018). The Relationship Stock Returns and Monetary Policy Shocks. Journal of Accounting, Finance and Auditing Studies, 4(3), 241-257.
• Keskin, N. (2018). The Role of Capital Flows in the Adoption of New Monetary Policy Approach in Turkey after The Global Crisis and an Assessment on Capital Controls. Journal of Administrative Sciences, 16(31), 161-195.
• Mercan, M. (2013). Testing the Long-Term Relationship between Inflation and Nominal Interest Rates under Fisher Hypothesis: The Case of Turkey. Ataturk University Journal of Economics & Administrative Sciences, 27(4), 368-384.
• Oskay, C. (2017). Efficiency of New Monetary Policy Implementation of the Central Bank of the Republic of Turkey after the Global Financial Crisis. Institutions, National Identity, Power, and Governance in the 21st Century, Proceeding Book, 347-368.
• Özaktaş, F. D. (2008). Determination of Price Level New Approaches and Turkey's Experience. Journal of Academic Inquiries, 3(1), 157-174.
• Öztürk, N., & Durgut, D. (2011). Determinants of Interest Rate: An Empirical Analysis for Turkey. International Journal of Alanya Faculty of Business, 3(1), 117-144.
• Özyılmaz, A. (2016). Coordination of Monetary and Fiscal Policy Efficiency on the Macro Economic Goals. Balkan and Near Eastern Journal of Social Sciences, 2(1), 28-34.
• Sever, E., & Mızrak, Z. (2007). Relations between Foreign Currency, Inflation and Interest Rate: Turkey Practice. Selçuk University Social and Economic Research Journal, 7(13), 264-283.
• Şimşek, H. A. (2008). Financial Crisis and Fiscal Policies during Globalization Process: A Theorical Evaluation. Suleyman Demirel University Journal of Faculty of Economics & Administrative Sciences, 13(1), 183-208.
• Şimşek, H. A., & and Altay, A. (2009). Evaluation of the Fiscal Policy in Turkey in Global Crisis Environment. Journal of Finance-Politic and Economic Reviews, 528, 11-23.
• Tanrıöver, B., & Yamak, N. (2015). Analysis of Nominal Interest Rate-General Price Level Relationship within the Framework of Gibson Paradox. Journal of Finance, 168, 186-200.
• Tokucu, E. (2010). The 2007 Financial Crisis and Monetary Policies: On the Monetary Policies’ Failure. The Ekonomik Yaklasim, 21(76), 31-54.
• TSI. (2018). Inflation Statistics. http://www.tuik.gov.tr/UstMenu.do?metod=temelist, 02.12.2018.
• Tunalı, H., & Erönal, Y. Y. (2016). Relation between Inflation and Interest Rates: Validity of Fisher Effect in Turkey. Süleyman Demirel University Journal of Faculty of Economics & Administrative Sciences, 21(4), 1415-1431.
• Vergidosyası. (2018). Fiscal Policy and Components. https://vergidosyasi.com/2017/07/02/maliye-politikasi-ve-bilesenleri, 25.12.2018.
• Yurdakul, F., & Saçkan, O. (2007). Monetary and Fiscal Policy Dominant Regimes in Determining the General Price Level. Ankara University Journal of Faculty of Political Sciences, 62(2), 220-236.
• Yüksel, S., Dinçer, H., & Hacıoğlu, Ü. (2015). CAMELS-Based Determinants for the Credit Rating of Turkish Deposit Banks. International Journal of Finance & Banking Studies, 4(4), 1-17.