Browsing by Subject "Capital flows"
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Item Open Access Credit channel and capital flows: a macroprudential policy tool? – evidence from Turkey(Walter de Gruyter, 2016) Varlik, S.; Berument, HakanRapid credit growth induced by sudden capital inflows may negatively affect a country's economic performance, with the resulting outflows turning into a financial crisis. The purpose of this study is to determine whether controlling the credit channel of monetary policy could be used as a macroprudential tool to suppress the effects of sudden capital inflows on economic performance for small open economies like Turkey. In this paper, using the Vector Autoregression methodology employed by (Bernanke, S. B., M. Gertler, and M. Watson. 1997. "Systematic Monetary Policy and the Effects of Oil Price Shocks." Brookings Papers on Economic Activity 1: 91-157), we investigate whether shutting down the credit channel helps reduce the effects of capital inflows. Indeed, empirical evidence from Turkey shows that doing so decreases the effects of capital inflows on imports and industrial production, but further decreases interest rate and prices and further appreciates the domestic currency. Therefore, it may be prudent to support credit control with additional policy tools to prevent a further decrease in interest rate and prices and a further appreciation of the domestic currency. © 2016 by De Gruyter 2016.Item Open Access Do capital flows improve macroeconomic performance in emerging markets? The Turkish experience(Routledge, 2004) Berument, Hakan; Dincer, N. N.This study examines the effects of capital inflows on the macroeconomic performance in an emerging, small open economy-Turkey. Using monthly data from 1992:01 to 2001:06 and a recursive vector autoregression model, we find that positive innovations in capital inflows appreciate the domestic currency, and increase output and money supply, but decrease interest rates and prices in the short run. We also find that the exchange rate regime does not influence the effects of capital flows on macroeconomic performance. Implications of the findings for policymakers are analyzed.Item Open Access Effectiveness of monetary policy under different levels of capital flows for an emerging economy: Turkey(Routledge, 2015) Ülke, V.; Berument, HakanThis article assesses the effect of tight monetary policy on economic performance under different levels of capital flows. Empirical evidence from Turkey between 1990 and 2013 suggests that tight monetary policy measured with a positive innovation on interest rate appreciates the Turkish Lira and decreases output and prices. However, the effectiveness of monetary policy decreases for interest rate and increases for exchange rate and prices if capital flows are high. Specifically, interest rate, local currency value of foreign currency and prices will be lower for higher levels of capital flows. However, the relative effectiveness of monetary policy on output is virtually unchanged. © 2014 Taylor & Francis.Item Open Access Effectiveness of the reserve option mechanism as a macroeconomic prudential tool: evidence from Turkey(Routledge, 2015) Sahin, A.; Dogan, B.; Berument, HakanThis article assesses the effectiveness of a novel macroprudential tool – the reserve option mechanism (ROM) – which Turkey’s central bank developed during the post-2008 period and has employed to control the risk associated with excessive capital flows. We assess how capital flows have affected economic variable changes since the introduction and usage of the ROM. Empirical evidence gathered from Turkey suggests that the tool decreases the effect of capital flow on capital flow (positive shock to capital flow dies out faster or becomes less persistent) and diminishes the effects of capital flow shocks on exchange and interest rates. © 2015 Taylor & Francis.Item Open Access The effects of capital inflows on Turkish macroeconomic performance(Springer/Kluwer Academic Publishers, 2015) Berument, Hakan; Denaux, Z. S.; Emirmahmutoglu, F.Capital inflows are important factor affecting macroeconomic performance, such as the real exchange rate, interest rates, output, and price level. However, the components of capital inflows are also important. Capital inflows in the forms of portfolio investment liabilities, foreign direct investment, and other investment liabilities may affect these macroeconomic variables differently. The main focus of this study is to analyze the behavior of key macroeconomic variables in response to the different components of capital inflow shocks for Turkey using monthly data from 2000:1 to 2012:12 by utilizing a vector autoregression model. © 2015, Springer Science+Business Media New York.