Abstract:

The aim of this study is to experimentally analyze the interaction between inflation and interest rates during the 2002:M01-2019:M01 period in which the inflation targeting regime was implemented by TCMB. Because the high inflation problem in Turkey continues and there are a number of differences between economists and politicians on the reasons for this. This is a matter of importance for the current and country economy. The stagnation degrees of the series used in the analysis; ADF, PP and structural broken ADF unit root tests were studied and when the first difference of the inflation series was taken, the interest series were determined to be stagnant in the level values. Since the series are stable from different degrees, the matching relationships between the series have been studied with the Border Test and the matching relationships between the series used in the models have existed, i.e. these series have been determined to work together over a long period of time. Long-term analyses were done using the ARDL method and the inflation rate in Turkey was determined to have increased by 0.25% of the 1% point increase in commercial credit interest, 0.05% point increase in deposit interest. On the other hand, the inflation rate increased by 1 per cent, the commercial credit interest increased by 0.23 per cent, and the temporary deposit interest increased by 0.59 per cent. Finally, the 1% point increase in the deadline deposit interest rates found that the commercial credit interest rates increased by 1.04%. Short-term analyses were also performed using the ARDL method and found that the models worked with the errors correction mechanisms. Commercial credit interest rates have also been determined to increase inflation in the short term, and commercial credit interest rates have been increased by inflation and temporary deposit interest rates. In addition, the impact of inflation on short-term deposit interests has not been statistically significant. The Fisher effect in the Turkish economy has been valid for a long period of time, but has not been valid for a short period of time. The causality relationships between the series have been studied by the Toda-Yamamoto method and there is no causality relationship from interest rates to inflation, but there is only a one-way causality relationship from inflation to temporary deposit interest rates. This result is in line with our theoretical expectations and the Fisher Equality. That is, contrary to the common saying in Turkey, the interest rate is not inflation, but the way inflation is included in the economic theory, the interest rate is affected. As inflation increases, the long-term deposit owners demand more interest from the banks to maintain their real profits.

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