Abstract:

The Central Bank of the Republic of Turkey (CBRT)’s main target was price stability until the 2008 global crisis, it also focused on financial stability in the post-crisis period. CBRT has implemented new monetary policies that would react against shocks apart from traditional practices to limit the negative effects of the crisis since the end of 2010. The aim of this study is to analyze the effectiveness of the transmission channels of the monetary policies implemented by CBRT, comparing the traditional and new monetary policy periods. In this study, the effectiveness of the change in the monetary policy of the central bank in achieving the stability goals through credit and exchange rate transfer channels was compared as of 2002-2011 and 2011-2020 periods. The structural VAR (SVAR) model was used in the analysis since it allows the structural changes of variables based on economic theory. According to the findings, the effect of credit and exchange rate channels on inflation in 2002-2011 is compatible with the expectations. It was found that interest rate is the most important determinant of the fluctuations in credits and exchange rates. In 2011-2020, the effect of the transmission mechanism of credit and exchange rate channels over interest rates on inflation is compatible with the expectations. The majority of the variations in credits and exchange rates originated from the interest rates. Most of the fluctuations in inflation are caused by exchange rate and credit fluctuations, and the explanatory power of the exchange rate is relatively high.

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