The Transmission Mechanism Of Monetary Policy Shocks In Turkiye

Official URL: http://risc01.sabanciuniv.edu/record=b3422596

This paper, tries to identify the monetary policy shocks in Türkiye, and empirically analyzes the impact of them on main macroeconomic indicators for the period 2006M1-2023M8, specifically focusing on two external shocks of consumer prices and global demand, and two domestic shocks of interest rate and risk premium. For this purpose, I first employ structural VAR model with block exogeneity notion, and I distinguish the surprise component of monetary policy generated from SVAR model to analyze its impacts through local projection model. Results imply a positive interest rate shock decreases the prices, appreciates the domestic currency, and reduces the output slightly. Türkiye, being a small open economy is significantly affected by world indicators. An increase in world consumer price and world output increases domestic inflation and domestic output, respectively. Lastly, monetary policy shocks affect consumer credits negatively as expected, while unexpectedly increasing the stock market.