A study about the monetary policy rule of the Central Bank of the Republic of Turkey in the implicit inflation targeting framework
Author
Kaya, Şerife Demet
Advisor
Yeldan, Erinç
Date
2006Publisher
Bilkent University
Language
English
Type
ThesisItem Usage Stats
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Abstract
The gist of the study presented in this thesis is to provide an answer mainly to
two questions: First; whether in the last four years the Central Bank of the Republic
of Turkey (CBRT or Central Bank) has followed a monetary policy rule consistent
with its commitments about price stability objectives, implicit inflation targeting
regime and floating exchange rate. Second one is if it has done to what extend this
rule has resembled the original Taylor rule. In the study, to investigate the answer to
these questions a backward-looking model for a monetary policy rule is described
and is subjected to an econometric estimation process. It yields significant results
for the interval between 2001 and 2005. In a summary, the findings support that
while after 2001 the rate of inflation has continued to be a dominant indicator to
which the CBRT reacted consistent with its commitments, coming to the current
years the real exchange rate (RER) movements and current account deficits have
gained an increasing significance in monetary policy rule. Hence, the thesis argues
that instead of being tied to a simple Taylor rule, the CBRT might have adopted a
differentiated policy rule where it has concerned RER and current account deficit
beside the rate of inflation.
Keywords
The Central Bank of the Republic of TurkeyInflation Targeting
Monetary Policy Rule
Taylor Rule
Real Exchange Rate
Current Account Deficit