Abstract:

This paper studies the interest rates pass-through from changes in the official interest rate of the Central Bank of the Republic of Turkey (CBRT) to market interest rates in Turkey. In this context, we have collected six market interest rates series, such as bank rate (BR), lending rate (LR), deposit rate (DR), money market rate (MMR), Treasury bill rate (TBR) and the government bond yield (GBY). First, we conducted an analysis of the correlation of the series. Second, we examined the cointegration of the series and then used Bayesian vector autoregression to estimate the response of interest rates to the bank rate. The results show that there is a long-run relationship between the interest rates and there is a strong correlation between the bank interest rate and the third interest rates such as the money market rate, the deposit rate (DR) and the lending rate. There is a complete the pass-through between the bank rate and the landing rate. There is over pass-through between the money market rate and the bank rate and strong pass-through between the Treasury bill rate, the deposit rate and the bank rate. There is no pass-through between government bond yield and the bank rate.

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