Browsing by Subject "Yield Curve"
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Item Open Access Essays on macroeconomics(Bilkent University, 2018-09) Taş, Mustafa AnılThis dissertation consists of three essays on macroeconomics. The first essay models the term structure of interest rates in an international framework from a macro-finance perspective. Other essays focus on the Turkish economy. The second essay measures the potential growth rate of the Turkish economy. Finally, the third essay examines the stance of monetary policy in Turkey in the post-2001 period. In the first chapter, I develop a two-country ane term structure model that accounts for the interactions between the macroeconomic and financial variables of each country. The model features a structural preference side and reduced form macroeconomic dynamics. The economies are connected through covered interest parity. Using this framework, I provide an empirical application of the model using data from the United States and the United Kingdom. I quantify the extent to which economic dynamics in one country explain the other’s nominal term structure. I find that the variation in the bond yields in each country is explained mostly by domestic factors. The cross-country effects are more prominent in pricing of the U.S. bonds. In the second chapter, I estimate the potential growth rate of the Turkish economy using a bivariate filter. I define the potential growth as the output growth rate at which selected macroeconomic imbalance indicators do not diverge from their targets. This definition of the potential growth implies results that are substantially different than those suggested by the Hodrick-Prescott filter. I find that these imbalance indicators would not have deteriorated, had Turkey grown at much lower rates particularly after the Great Recession. I also find that for the last five years, Turkey’s potential growth rate is 3 percentage points below the trend growth rate on average. Finally, the results of this study are consistent with the growth target published in the recently announced economic plan of Turkey. The third chapter is a joint work with Refet Gürkaynak, Zeynep Kantur and Se¸cil Yıldırım-Karaman. In this chapter, we present an accessible narrative of the Turkish economy since its great 2001 crisis. We broadly survey economic developments and pay particular attention to monetary policy. The data suggests that the Central Bank of Turkey was a strong inflation targeter early in this period but began to pay less attention to inflation after 2009. Loss of the strong nominal anchor is visible in the break we estimate in Taylor-type rules as well as in asset prices. We also argue that recent discrete jumps in Turkish asset prices, especially the exchange value of the lira, are due more to domestic factors. In the post-2009 period the Central Bank was able to stabilize expectations and asset prices when it chose to do so, but this was the exception rather than the rule.Item Open Access Stochastic analysis of short-rate modeling: which approach yields a better fit to data?(Bilkent University, 2017-09) Bulut, MustafaThis thesis investigates the extent to which the two of the most common onefactor short-rate models are able to describe the market behavior of risk free Turkish treasuries for the post-2005 period. The investigated models are those widely used ones in the literature, which has analytical solutions, namely the Vasicek Model and the Cox-Ingersoll-Ross (CIR) Model. After building the necessary mathematical and financial structure, the thesis discusses the stochastic mechanics of interest rate modeling and in light of it, the zero-coupon bond prices in the models are solved, which are needed to numerically estimate model coeffi- cients. The success of a model depends on how close it estimates the bond price to the market price. In the empirical part, the fitting performance of these two models is compared together with the current benchmark, the Nelson-Siegel (NS) Model, via the standard model fitting statistics. The estimation results reveals two important regularities: Firstly the models yield a poor fitting performance during the financial crisis period and secondly the models' degree of fit to data deteriorates as the maturity raises. Among the alternative models, the CIR in general yields the worst fit to data despite its theoretical complexity while the simple Vasicek Model achieves a high degree of fit to data. Lastly the estimated yield curves for specific dates and the zero rates of varying maturities are provided, which are expected to guide policy makers and practitioners.