Abstract:

Purpose: Monetary policy decisions can affect the real economy through transmission channels. In this study, the role of two monetary transmission channels is assessed on the contribution of monetary policy decisions to growth in Turkey. The main purpose of the study is to put forth the validity of the interest rate channel and bank credit channel and whether the bank credit channel supports the interest channel. Design/Methodology: The analysis is carried out using the data of the policy interest rate, bank deposits, bank loans, gross fixed capital formation and gross domestic product for the period 2010:Q1-2021:Q2. The stationarities of the variables are identified with the sharp and precise unit root test (SOR), which takes all data structures together in a single unit root test. The structural VAR model is estimated under the long-term constraint, and empirical results are obtained according to impulse-response functions and structural variance decomposition. Findings: According to the findings, both the interest channel and the bank credit channel are partially effective and have a limited role in economic growth. In addition, the bank credit channel strengthens the interest channel, albeit weakly. Limitations: The main limitation of the study is to handle the validity of the interest channel and bank credit channel in terms of Turkey. Originality/Value: In the study, the SOR unit root test is used for the first time in the field of monetary policy. Besides, structural VAR analysis is performed with a long-term constraint based on the Blanchard-Quah method.

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