Abstract
In this paper we investigated whether the Central bank of Turkey (CBRT) followed a strict Taylor Rule during 2003-2012. We found that it has not, due to different reasons in different periods: inflation targeting policy before the global crisis and trying to achieve the joint targets of price and financial stabilities after the crisis. Furthermore we tried to formulate a modified Taylor Rule which fitted the actual courseof nominal interest rate during 2010-2012 as closely as possible. In contrast with our estimated modified Taylor Rule which indicated that the nominal interest rates were increased only by 0.49% in practice during 2010-2012, the estimated standard Taylor Rule suggested an increase of the nominal interest rates by 1.23% during 2008-2010 for each percentage change in the inflationary gap. Hence, this displayed a loose monetary policy with respect to the strict Taylor Rule. As a matter of fact, in January 2014, CBRT had to increase its policy interest rate down from 4 % up to 10 %
Keywords
References
- ALPER, K. and TİRYAKİ, T., 2011. "Zorunlu Karşılıkların Para Politikasındaki Yeri", TCMB, Ekonomi Notu, No:11/08.
- BAŞÇI, E., 2011. Presentation at meetings of the World Bank and IMF, April
- 2011, Ankara, speeches from www.tcmb.gov.tr.
- BAŞÇI, E. and KARA, H., 2011. "Finansal İstikrar ve Para Politikası", İktisat, İşletme ve Finans’’ 26(302), pages: 9-25.
- CLARIDA, R., GERTLER, M., 1997. "How the Bundesbank Conducts Monetary Policy’’. In Romer, C., Romer, D. (eds.), Reducing Inflation. University of Chicago Press, Chicago.
- CLARIDA, R., GALI, J. and GERTLER, M., 1998. "Monetary Policy Rules in Practice: some International Evidence", European Economic Review, 42, 1033-67.
- CLARIDA, R., GALI, J. and GERTLER, M., 1999. "The Science of Monetary Policy: a Literature, XXXVII, 1661-707.
- CLARIDA, R., GALI, J. and GERTLER, M., 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and some Theory", The Quarterly Journal of Economics, 115, 147-80.
- CLARIDA, R. GALI, J. and GERTLER, M., 2001. "Optimal Monetary Policy in Open versus Close Economies: an Integrated Approach", American Economic Review, 91, 248-52.
- EMİR, O, Y., KARASOY, A. and KUNTER, K., 2000. "Monetary Policy Reaction Function in Turkey", Research Department of CBRT: Conference on Banking, Financial Markets and the Economies of ME and NA, Beirut, May 25-27, 2000.
- IMF, 2012. Country Report No. 12/339. Turkey: Selected Issues.
- KARA, H., 2006. "Turkish Experience with Implicit Inflation Targeting", CBRT’’ Working paper no: 06/03, Ankara, September.
- KARA, H., 2012. "Küresel Kriz Sonrası Para Politikası", CBRT’’ Working paper no: 12/17, Ankara, June.
- ÖZATAY, F., 2011. "Merkez Bankası’nın yeni Para Politikası: İki Hedef - Üç Ara Hedef - Üç Araç", İktisat, İşletme ve Finans’’ 26(302), pages: 27-43.
- TAYLOR, J., 1993. "Discretion versus Policy Rules in Practice", Carnegie- Rochester Conferences on Public Policy, 39, pages: 195-214.
Abstract
In this paper we investigated whether the Central bank of Turkey (CBRT) followed a strict Taylor Rule during 2003-2012. We found that it has not, due to different reasons in different periods: inflation targeting policy before the global crisis and trying to achieve the joint targets of price and financial stabilities after the crisis. Furthermore we tried to formulate a modified Taylor Rule which fitted the actual courseof nominal interest rate during 2010-2012 as closely as possible. In contrast with our estimated modified Taylor Rule which indicated that the nominal interest rates were increased only by 0.49% in practice during 2010-2012, the estimated standard Taylor Rule suggested an increase of the nominal interest rates by 1.23% during 2008-2010 for each percentage change in the inflationary gap. Hence, this displayed a loose monetary policy with respect to the strict Taylor Rule. As a matter of fact, in January 2014, CBRT had to increase its policy interest rate down from 4 % up to 10 %. Key Words: Taylor Rule, Reaction Function Of Central Bank, Modified Taylor Rule, Turkey
References
- ALPER, K. and TİRYAKİ, T., 2011. "Zorunlu Karşılıkların Para Politikasındaki Yeri", TCMB, Ekonomi Notu, No:11/08.
- BAŞÇI, E., 2011. Presentation at meetings of the World Bank and IMF, April
- 2011, Ankara, speeches from www.tcmb.gov.tr.
- BAŞÇI, E. and KARA, H., 2011. "Finansal İstikrar ve Para Politikası", İktisat, İşletme ve Finans’’ 26(302), pages: 9-25.
- CLARIDA, R., GERTLER, M., 1997. "How the Bundesbank Conducts Monetary Policy’’. In Romer, C., Romer, D. (eds.), Reducing Inflation. University of Chicago Press, Chicago.
- CLARIDA, R., GALI, J. and GERTLER, M., 1998. "Monetary Policy Rules in Practice: some International Evidence", European Economic Review, 42, 1033-67.
- CLARIDA, R., GALI, J. and GERTLER, M., 1999. "The Science of Monetary Policy: a Literature, XXXVII, 1661-707.
- CLARIDA, R., GALI, J. and GERTLER, M., 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and some Theory", The Quarterly Journal of Economics, 115, 147-80.
- CLARIDA, R. GALI, J. and GERTLER, M., 2001. "Optimal Monetary Policy in Open versus Close Economies: an Integrated Approach", American Economic Review, 91, 248-52.
- EMİR, O, Y., KARASOY, A. and KUNTER, K., 2000. "Monetary Policy Reaction Function in Turkey", Research Department of CBRT: Conference on Banking, Financial Markets and the Economies of ME and NA, Beirut, May 25-27, 2000.
- IMF, 2012. Country Report No. 12/339. Turkey: Selected Issues.
- KARA, H., 2006. "Turkish Experience with Implicit Inflation Targeting", CBRT’’ Working paper no: 06/03, Ankara, September.
- KARA, H., 2012. "Küresel Kriz Sonrası Para Politikası", CBRT’’ Working paper no: 12/17, Ankara, June.
- ÖZATAY, F., 2011. "Merkez Bankası’nın yeni Para Politikası: İki Hedef - Üç Ara Hedef - Üç Araç", İktisat, İşletme ve Finans’’ 26(302), pages: 27-43.
- TAYLOR, J., 1993. "Discretion versus Policy Rules in Practice", Carnegie- Rochester Conferences on Public Policy, 39, pages: 195-214.
Details
| Primary Language | TR |
|---|---|
| Journal Section | Makaleler |
| Authors | |
| Publication Date | March 9, 2015 |
| Published in Issue | Year 2014Volume: 4 Issue: 1 |