Abstract:

In general, monetary policy changes have a strong impact on financial markets and real economy through various channels, among others the interest rate channel, credit channel, exchange rate channel and asset price channel. This process through which monetary policy decisions impact on an economy in general and the interest rate in particular is known as the monetary policy transmission mechanism. Hence monetary authorities are supposed to know the relationship between monetary aggregates and interest rates in a certain monetary policy regime and the determinants that affect this relationship. The purpose of this paper is to analyze the interest rate channel in Turkey from the perspective of monetary policy transmission channel. The results from our empirical analysis, using quarterly data and applying the VAR model during the period between 2000:1 and 2011:3, it is suggest that traditional transmission mechanism works properly in Turkey

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