Identfying the liquidity effects of monetary policy shocks for a small open economy: Turkey
Open Economies Review
Springer New York LLC
649 - 667
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This paper proposes a new liquidity measure for a small open economy. The new measure includes the net liquidity provided to the system by a central bank after accounting for the central bank's involvement in the foreign exchange market. Empirical evidence gathered from Turkey suggests that a positive innovation in liquidity increases output temporarily and that its effect on prices, exchange rate and money are permanently higher.