Measuring the effects of monetary policy for Turkey
Dincer, N. N.
Journal of Economic Cooperation
Statistical Economic and Social Research and Training Centre for Islamic Countries
83 - 110
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This paper proposes a specification to identify the monetary policy for a small open economy, Turkey. The monetary policy is measured by using the spread between the Central Bank's interbank interest rate and the depreciation rate of the domestic currency. A VAR type of model is used to identify monetary policy covering the period 1986:05-2000:10. The results suggest that tight monetary policy has a transitory effect on output but a permanent effect on prices. This specification is free of some puzzles such as the price puzzle and the liquidity puzzle that hampered some of the previous studies.