Does Central Bank Of Republic Of TURKEY React To Asset Prices?

Year 2012, Volume: 2012 Issue: 1, 1 - 17, 01.06.2012

Ertuğrul Üstün Geyik

Abstract

The last decade made many Central Bankers dry and single minded inflation targeting bodies or at least they acted as if they were just targeting inflation. However, some speeches of the Central Bankers or some econometric analyses about Central Bank behaviors show different intentions. This paper analyses last ten years or the inflation targeting years of CBRT and tries two answer two critical questions: Does CBRT react to asset prices and if it does, is this reaction asymmetrically biased? A Taylor Rule like inflation targeting rule is used to regress Central Bank’s policy tool interest rate with inflation deviation, output gap and a self created Asset Price Index. The econometric analysis below shows that the answer to both of the questions above is positive in this context.

Keywords

Central Bank Policy, Asymmetric Behavior, Asset Booms, Housing Bubble, GMM

References

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