Abstract:

Central banks affect the interest rates in the market through the interest channel, which is one of the monetary transmission mechanisms. The reaction of market interest rates to central bank policies is one of the important issues for financial market participants and policy makers. This study was conducted to determine the effect of the CBRT's weighted average funding cost on bank rates. The data set includes weekly values between January 6, 2012 and January 28, 2022. In the study, the VAR model was estimated and then variance decomposition and impulse-response analysis were applied. As a result of variance decomposition, it has been determined that the effect of the CBRT weighted average funding cost on the change in deposit interest rates is higher than the effect on the change in loan interest rates. The results of the impulse-response analysis show that the effect of the CBRT's weighted average funding cost on bank interest rates increased for about 5 months, and then continued to have a positive effect despite the decrease in its power of influence.

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