Abstract:

Analyzing monetary policy objectives and instruments, this study examines monetary policy implementations and their effects in Turkey since the foundation of the Republic. At the same time, the study questions the "break" experienced in 2021 and emphasizes the need to establish an effective monetary policy framework by abandoning erroneous and costly policies in which the monetary policy objective and instrument are switched. It is stated that in order to achieve and maintain economic stability, the central bank should focus on the price stability target, select policy instruments in accordance with the objectives and data conditions, and implement policy decisions independently and consistently. With this approach, it would be possible to maintain economic stability, control inflation, ensure financial stability and promote economic growth. Establishing and maintaining an effective monetary policy framework guided by economic science plays a critical role in securing Turkey's economic stability. However, despite the negative consequences of the recent flawed monetary policies, the Central Bank of the Republic of Turkey's (CBRT) continuation of these costly practices has led to debates about the independence of the Central Bank. In this context, the study questions the independence of the CBRT as well as Turkey's interest rate policies and their consequences, which contradict the theory. Moreover, the economic administration should adopt a holistic approach, coordinate with other policy areas and focus on populist, planned, comprehensive and harmonized structural reforms. The study is important as it critically reveals the paradigm shift since the founding of the Republic of Turkey. Future empirical studies on this rupture in the 100th anniversary of the Republic will be instructive for future periods.

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