Interest Rate Smoothing and Macroeconomic Instability under Post-Capital Account Liberalization Turkey
Yeldan, A. E.
Olcum, G. A.
Canadian Journal of Development Studies / Revue canadienne d'études du développement
Taylor & Francis
Cömert, H., Olçum, G. A., & Yeldan, A. E. (2010). Interest Rate Smoothing and Macroeconomic Instability under Post—Capital Account Liberalization Turkey. Canadian Journal of Development Studies/Revue canadienne d'études du développement, 31(3-4), 459-482.
Please cite this item using this persistent URLhttp://hdl.handle.net/11693/13342
This paper considers the interest rate policy of the Central Bank of the Republic of Turkey (CBRT) in the post-financial liberalization and deregulation era. We find that (1) the Bank's interest rate smoothing tendency is the main determinant of its monetary policy in this period, (2) the CBRT does not seem to be responsive to the developments in real economy (output), and (3) although inflation targeting central banks are not supposed to pay attention to exchange rates, the CBRT appears to be slightly responsive to changes in real exchange rate. In answer to the question of whether there is a deeper underlying Structural constraint binding the CBRT's "independence," it seems clear that the global financial system is restricting the ability of the central banks to pursue "independent" policy objectives.
- Department of Economics