Research Article
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Year 2020, , 457 - 473, 13.10.2020
https://doi.org/10.17130/ijmeb.798572

Abstract

References

  • Barnett, W. A., Bhadury, S. S., & Ghosh, T. (2016). An SVAR approach to evaluation of monetary policy in India: Solution to the exchange rate puzzles in an open economy. Open Economies Review, 27(5), 871–893.
  • Berument, H. (2007). Measuring monetary policy for a small open economy: Turkey. Journal of Macroeconomics, 29(2), 411–430.
  • Bjørnland, H. C. (2009). Monetary policy and exchange rate overshooting: Dornbusch was right after all. Journal of International Economics, 79, 64–77.
  • Bouakez, H., & Normandin, M. (2010). Fluctuations in the foreign exchange market: How important are monetary policy shocks. Journal of International Economics, 81(1),139-153.
  • Christiano, L. J., Eichenbaum, M., & Evans, C.L. (1996). The effects of monetary policy shocks: Evidence from the flow of funds. Review of Economics and Statistics, 78, 16-34.
  • Deniz, P. (2014). Consumer confidence in dynamic stochastic general equilibrium model (Doctoral Dissertation). Marmara Üniversitesi, İstanbul.
  • Dornbusch, R. (1976). Expectations and exchange rate dynamics. Journal of Political Economy, 84, 1161- 1176.
  • Eichenbaum, M. (1992). Interpreting the macroeconomic time series facts: The effects of monetary policy. European Economic Review, 36(5), 1001-1011.
  • Eichenbaum, M., & Evans, C. (1995). Some empirical evidence on the effects of shocks to monetary policy on exchange rates. Quarterly Journal of Economics, 110, 975-1010.
  • Faust, J., & Rogers, J. H. (2003). Monetary policy’s role in exchange rate behavior. Journal of Monetary Economics, 50, 1403-1622.
  • Favero, C. A., & Marcellino, M. (2004). Large datasets, small models and monetary policy in Europe. Bocconi University.
  • Grilli, V., & Roubini, N. (1995). Liquidity and exchange rates: Puzzling evidence from the G-7 countries. Working Papers 95-17, New York University, Leonard N. Stern School of Business, Department of Economics.
  • Heinlein, R., & Krolzig, H-M. (2012). Effects of monetary policy on the US Dollar/UK pound Exchange rate. Is there a “delayed overshooting puzzle? Review of International Economics, 20(3), 443-467.
  • Kilinc, M., & Tunc, C. (2014). Identification of monetary policy shocks in Turkey: A structural VAR approach. Working Paper No. 1423, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  • Kim, S., & Lim, K. (2018). Effects of monetary policy shocks on exchange rate in small open Economies. Journal of Macroeconomics, 56, 324-339.
  • Kim, S., & Roubini, N. (2000). Exchange rate anomalies in the industrial countries: A solution with a structural VAR approach. Journal of Monetary Economics, 45, 561-586.
  • Leeper, E., & Roush, J. (2003). Putting ‘M’ back in monetary policy. Journal of Money, Credit and Banking, 35(6), 1217-1256.
  • Mojon, B., & Peersman, G. (2003). AVAR description of the effects of monetary policy in the individual countries of the Euro area. In I. Angeloni, A. Kashyap, B. Mojon (Eds.), Monetary Policy Transmission in the Euro Area, Part I. (pp. 56-74), Cambridge: Cambridge University Press.
  • Peersman, G., & Smets, F. (2001). The monetary transmission mechanism in the Euro Area: More evidence from VAR analysis. Working Paper No:91, European Central Park.
  • Scholl, A., & Uhlig, H. (2008). New evidence on the puzzles: Results from agnostic identification on monetary policy and exchange rates. Journal of International Economics, 76, 1-13.
  • Sims, C. A. (1992). Interpreting the macroeconomic time series facts: The effects of monetary policy. European Economic Review, 36, 975-1011.
  • Sims, C. A., & Zha, T. (2006). Does monetary policy generate recessions? Macroeconomic Dynamics, 10(02), 231-272.
  • Strongin, S. (1995). The identification of monetary policy disturbances: Explaining the liquidity puzzle. Journal of Monetary Economics, 34, 463-497.
  • Ulke, V., & Berument, M. H. (2016). Asymmetric effects of monetary policy shocks on economic performance: Empirical evidence from Turkey. Applied Economics Letters, 23(5), 353-360.

EVALUATION OF MONETARY POLICY SHOCKS IN TURKEY: A STRUCTURAL VAR APPROACH

Year 2020, , 457 - 473, 13.10.2020
https://doi.org/10.17130/ijmeb.798572

Abstract

This paper empirically investigates the effects of monetary policy shocks on the Turkish economy
using a structural VAR model. Monetary policy shocks are identified based on the non-recursive structural
identification scheme. Since monetary policy stance is contingent on different funding rates in the wide
interest rate corridor for the selected sample period, 2011:M1-2018:M12, this paper employs “weighted
average funding cost”to represent the monetary policy stance of the CBRT. The baseline identification
scheme is also extended in different ways to check the robustness of the results. The empirical results
can be summarized as follows. First, Turkish data are not free from price and exchange rate puzzles.
More importantly, qualitative inferences are quite persistent across different identification restrictions.
Second, structural impulse-responses reveal that there is a two-way simultaneous interaction between
monetary policy and exchange rate. Finally, the presence of money stock in the VAR model is redundant
for identifying monetary policy shocks since the VAR models with and without money stock generate
almost identical results.

References

  • Barnett, W. A., Bhadury, S. S., & Ghosh, T. (2016). An SVAR approach to evaluation of monetary policy in India: Solution to the exchange rate puzzles in an open economy. Open Economies Review, 27(5), 871–893.
  • Berument, H. (2007). Measuring monetary policy for a small open economy: Turkey. Journal of Macroeconomics, 29(2), 411–430.
  • Bjørnland, H. C. (2009). Monetary policy and exchange rate overshooting: Dornbusch was right after all. Journal of International Economics, 79, 64–77.
  • Bouakez, H., & Normandin, M. (2010). Fluctuations in the foreign exchange market: How important are monetary policy shocks. Journal of International Economics, 81(1),139-153.
  • Christiano, L. J., Eichenbaum, M., & Evans, C.L. (1996). The effects of monetary policy shocks: Evidence from the flow of funds. Review of Economics and Statistics, 78, 16-34.
  • Deniz, P. (2014). Consumer confidence in dynamic stochastic general equilibrium model (Doctoral Dissertation). Marmara Üniversitesi, İstanbul.
  • Dornbusch, R. (1976). Expectations and exchange rate dynamics. Journal of Political Economy, 84, 1161- 1176.
  • Eichenbaum, M. (1992). Interpreting the macroeconomic time series facts: The effects of monetary policy. European Economic Review, 36(5), 1001-1011.
  • Eichenbaum, M., & Evans, C. (1995). Some empirical evidence on the effects of shocks to monetary policy on exchange rates. Quarterly Journal of Economics, 110, 975-1010.
  • Faust, J., & Rogers, J. H. (2003). Monetary policy’s role in exchange rate behavior. Journal of Monetary Economics, 50, 1403-1622.
  • Favero, C. A., & Marcellino, M. (2004). Large datasets, small models and monetary policy in Europe. Bocconi University.
  • Grilli, V., & Roubini, N. (1995). Liquidity and exchange rates: Puzzling evidence from the G-7 countries. Working Papers 95-17, New York University, Leonard N. Stern School of Business, Department of Economics.
  • Heinlein, R., & Krolzig, H-M. (2012). Effects of monetary policy on the US Dollar/UK pound Exchange rate. Is there a “delayed overshooting puzzle? Review of International Economics, 20(3), 443-467.
  • Kilinc, M., & Tunc, C. (2014). Identification of monetary policy shocks in Turkey: A structural VAR approach. Working Paper No. 1423, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  • Kim, S., & Lim, K. (2018). Effects of monetary policy shocks on exchange rate in small open Economies. Journal of Macroeconomics, 56, 324-339.
  • Kim, S., & Roubini, N. (2000). Exchange rate anomalies in the industrial countries: A solution with a structural VAR approach. Journal of Monetary Economics, 45, 561-586.
  • Leeper, E., & Roush, J. (2003). Putting ‘M’ back in monetary policy. Journal of Money, Credit and Banking, 35(6), 1217-1256.
  • Mojon, B., & Peersman, G. (2003). AVAR description of the effects of monetary policy in the individual countries of the Euro area. In I. Angeloni, A. Kashyap, B. Mojon (Eds.), Monetary Policy Transmission in the Euro Area, Part I. (pp. 56-74), Cambridge: Cambridge University Press.
  • Peersman, G., & Smets, F. (2001). The monetary transmission mechanism in the Euro Area: More evidence from VAR analysis. Working Paper No:91, European Central Park.
  • Scholl, A., & Uhlig, H. (2008). New evidence on the puzzles: Results from agnostic identification on monetary policy and exchange rates. Journal of International Economics, 76, 1-13.
  • Sims, C. A. (1992). Interpreting the macroeconomic time series facts: The effects of monetary policy. European Economic Review, 36, 975-1011.
  • Sims, C. A., & Zha, T. (2006). Does monetary policy generate recessions? Macroeconomic Dynamics, 10(02), 231-272.
  • Strongin, S. (1995). The identification of monetary policy disturbances: Explaining the liquidity puzzle. Journal of Monetary Economics, 34, 463-497.
  • Ulke, V., & Berument, M. H. (2016). Asymmetric effects of monetary policy shocks on economic performance: Empirical evidence from Turkey. Applied Economics Letters, 23(5), 353-360.
There are 24 citations in total.

Details

Primary Language English
Journal Section Research Articles
Authors

Oğuz Tümtürk This is me 0000-0002-1935-0858

Publication Date October 13, 2020
Submission Date October 31, 2019
Acceptance Date May 4, 2020
Published in Issue Year 2020

Cite

APA Tümtürk, O. (2020). EVALUATION OF MONETARY POLICY SHOCKS IN TURKEY: A STRUCTURAL VAR APPROACH. Uluslararası Yönetim İktisat Ve İşletme Dergisi, 16(3), 457-473. https://doi.org/10.17130/ijmeb.798572