The Monetary Policy Reaction Function in Turkey: Evidence from Fourier-Based Time Series Methods

Yıl 2019, , 159 - 173, 31.12.2019

Ümit Bulut

https://doi.org/10.26650/ISTJECON2019-0024

Öz

The Central Bank of the Republic of Turkey (CBRT), which adopted an inflation targeting strategy in 2006, has thus far typically missed the inflation target. Therefore, this paper focuses on the monetary policy reaction function of the CBRT to detect the economic indicators that the CBRT considers while it is adjusting short-term interest rates. Put differently, the goal of this paper is to estimate a forward-looking monetary policy reaction function for the CBRT. To that end, the paper uses monthly data over the period 2006:1-2019:5. Differing from the previous papers in the empirical literature, this paper considers recent developments in time series analysis and employs time series methods based on the Fourier approximation to capture structural breaks. These methods are capable of presenting efficient and unbiased results in the presence of both sharp and gradual breaks. The findings indicate that the CBRT considers only inflation while it is steering short-term interest rates.

Anahtar Kelimeler

Monetary policy reaction function, the Central Bank of the Republic of Turkey, time series methods based on the Fourier approximation

Türkiye’de Para Politikası Tepki Fonksiyonu: Fourier Temelli Zaman Serisi Yöntemlerinden Bulgular

Öz

2006 yılında enflasyon hedeflemesi stratejisini benimseyen Türkiye Cumhuriyet Merkez Bankası (TCMB) bu zamana kadar genellikle enflasyon hedefini kaçırmıştır. Bu nedenle, bu çalışma TCMB’nin kısa vadeli faiz oranlarını ayarlarken hangi ekonomik göstergeleri dikkate aldığını tespit etmek için TCMB’nin para politikası tepki fonksiyonuna odaklanmaktadır. Diğer bir ifadeyle, bu çalışmanın amacı TCMB için ileri bakışlı bir para politikası tepki fonksiyonu tahmin etmektir. Bu amaç doğrultusunda, çalışmada 2006:12019:5 dönemine ait aylık veriler kullanılmaktadır. Literatürde yer alan önceki çalışmalardan farklı olarak, bu çalışma zaman serisi analizindeki güncel gelişmeleri dikkate alarak yapısal kırılmaları yakalamak için Fourier yaklaşımına dayalı zaman serisi yöntemleri kullanmaktadır. Bu yöntemler, hem keskin hem de aşamalı kırılmaların varlığında etkin ve sapmasız sonuçlar sunabilmektedir. Çalışmadan elde edilen bulgular, TCMB’nin kısa vadeli faiz oranlarını ayarlarken yalnızca enflasyon ile ilgilendiğine işaret etmektedir.

Anahtar Kelimeler

Para politikası tepki fonksiyonu, Türkiye Cumhuriyet Merkez Bankası, Fourier yaklaşımına dayalı zaman serisi yöntemleri

Kaynakça

• Adanur-Aklan, N., & Nargelecekenler, M. (2008). Taylor rule in practice: evidence from Turkey, International Advances in Economic Research, 14(2), 156–166.
• Banks Association of Turkey. (2019). TRlibor. Retrieved from http://www.trlibor.org/english/
• Berument, H., & Malatyali, K. (2000). The implicit reaction function of the Central Bank of the Republic of Turkey. Applied Economics Letters, 7(7), 425–430.
• Berument, H., & Taşçı, H. (2004). Monetary policy rules in practice: evidence from Turkey. International Journal of Finance and Economics, 9, 33–38.
• Bofinger, P., Reischle, J., & Schachter, A. (2001). Monetary policy: goals, institutions, strategies, and instruments. New York: Oxford University Press.
• Bondt, G. J. de. (2005). Interest rate pass-through : empirical results for the Euro Area. German Economic Review, 6(1), 37–78.
• Bulut, U. (2016). How far ahead does the Central Bank of the Republic of Turkey look? Journal of Central Banking Theory and Practice, 5(1), 99–111.
• Bulut, U. (2019). Does the Central Bank of the Republic of Turkey respond asymmetrically to inflation and output? Margin: The Journal of Applied Economic Research, 13(4), 381–400.
• Caporale, G. M., Helmi, M. H., Çatık, A. N., Ali, F. M., & Akdeniz, C. (2018). Monetary policy rules in emerging countries: is there an augmented nonlinear Taylor rule? Economic Modelling, 72, 306– 319.
• Central Bank of the Republic of Turkey. (2019). Electronic Data Delivery System. Retrieved from https://evds2.tcmb.gov.tr/
• Clarida, R., Gali, J., & Gertler, M. (1998). Monetary policy rules in practice. European Economic Review, 42(6), 1033–1067.
• Clarida, R., Gali, J. & Gertler, M. (2000). Monetary policy rules and macroeconomic stability: evidence and soe theory. The Quarterly Journal of Economics, 115(1), 147–180.
• Égert, B., Crespo-Cuaresma, J., & Reininger, T. (2007). Interest rate pass-through in Central and Eastern Europe: reborn from ashes merely to pass away? Journal of Policy Modeling, 29(2), 209–225.
• Enders, W., & Lee, J. (2012). The flexible Fourier form and Dickey-Fuller type unit root tests. Economics Letters, 117(1), 196–199.
• Erdem, E., Bulut, U., & Kocak, E. (2017). Have financial stability concerns changed the priority of the Central Bank of the Republic of Turkey? Studies in Business and Economics, 12(2), 35–45.
• Ertug, D., Ozlu, P., & Yunculer, C. (2018). How does the use of imported inputs affect exchange rate and import price pass-through? Retrieved from http://tcmbblog.org/wps/wcm/connect/blog/ en/main+menu/analyses/how_does_the_use_of_imported_inputs_affect
• Gozgor, G. (2012). Inflation targeting and monetary policy rules: further evidence from the case of Turkey. Journal of Applied Finance & Banking, 2(5), 127–136.
• Gregory, A. W., & Hansen, B. E. (1996). Residual-based tests for cointegration in models with regime shifts. Journal of Econometrics, 70, 99–126.
• Hasanov, M., & Omay, T. (2008). Monetary policy rules in practice: re-examining the case of Turkey. Physica A: Statistical Mechanics and Its Applications, 387(16-17), 4309–4318.
• Hatemi-j, A. (2008). Tests for cointegration with two unknown regime shifts with an application to financial market ıntegration. Empirical Economics, 35(3), 497–505.
• Hodrick, R. J., & Prescott, E. C. (1997). Postwar U.S. business cycles: an empirical ınvestigation. Journal of Money, Credit and Banking, 29(1), 1–16.
• Judd, J., Rudebusch, G., & Rudebusch, G. (1998). Taylor’s rule and the Fed, 1970-1997. FRBSF Economic Review, 3, 3–16.
• Lee, J., & Strazicich, M. C. (2003). Minimum lagrange multiplier unit root test with two structural breaks. Review of Economics and Statistics, 85, 1082–1089.
• Maki, D. (2012). Tests for cointegration allowing for an unknown number of breaks. Economic Modelling, 29(5), 2011–2015.
• Mishkin, F. S., & Posen, A. S. (1997). Inflation targeting: lessons from four countries. NBER Working Paper, 6126.
• Mishkin, F. S. (1997). Strategies for controlling inflation. NBER Working Paper, 6122.
• Narayan, P. K., & Popp, S. (2010). A new unit root test with two structural breaks in level and slope at unknown time. Journal of Applied Statistics, 37(9), 1425–1438.
• Öge-Güney, P. (2016). Does the Central Bank directly respond to output and ınflation uncertainties in Turkey? Central Bank Review, 16(2), 53–57.
• Öge-Güney, P. (2018). Asymmetries in monetary policy reaction function and the role of uncertainties: the case of Turkey. Economic Research, 31(1), 1367–1381.
• Robertson, M. L. (2016). securitization and financial markets: the ımplications for ınterest rate passthrough. Journal of Financial Economic Policy, 8(4), 472–498.
• Saikkonen, P. (1991). Asymptotically efficient estimation of cointegration regressions. Econometric Theory, 7, 1–21.
• Stock, J. H., & Watson, M. W. (1993). A simple estimator of cointegrating vectors in higher order ıntegrated systems. Econometrica, 61(4), 783–820.
• Svensson, L. E. O. (1997). Inflation forecast targeting: ımplementing and monitoring ınflation targets. European Economic Review, 41(6), 1111–1146.
• Taylor, J. B. (1993). Discretion versus policy rules in practice. Carnegie-Rochester Conference Series on Public Policy, 39, 195–214.
• Tsong, C. C., Lee, C. F., Tsai, L. J., & Hu, T. C. (2016). The fourier approximation and testing for the null of cointegration. Empirical Economics, 51(3), 1085–1113.
• Tunc, C., & Kilinc, M. (2018). Exchange rate pass-through in a small open economy: a structural var approach. Bulletin of Economic Research, 70(4), 410–422.
• Yazgan, M. E., & Yilmazkuday, H. (2007). Monetary policy rules in practice: evidence from Turkey and Israel. Applied Financial Economics, 17(1), 1–8.
• Zivot, E., & Andrews, D. W. K. (1992). Further evidence on the great crash, the oil-price shock, and the unit-root hypothesis. Journal of Business and Economic Statistics, 10(3), 251–270.