Open AccessRevisiting monetary policy effectiveness in Turkey using a FAVAR model
Author(s) -
Umurcan Polat
Publication year - 2022
Publication title -
panoeconomicus
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.289
H-Index - 14
eISSN - 2217-2386
pISSN - 1452-595X
DOI - 10.2298/pan210215009p
Subject(s) - monetary policy , divisia index , economics , inflation (cosmology) , interest rate , vector autoregression , econometrics , monetary economics , lira , inflation targeting , exchange rate , macroeconomics , statistics , mathematics , energy intensity , physics , theoretical physics , energy (signal processing)
This study aims to perform a comparative analysis of the effectiveness of pass-through of policy rates in Turkey. We explore monetary transmission with different choices of instruments, i.e., the Turkish Lira Reference Interest Rate (TRLIBOR rate), BIST overnight rate, and Divisia money, and under different policy regimes, i.e., inflation targeting and new monetary policy regimes. We estimate a two-stage FAVAR model to use all of the available information set and obtain direct responses of disaggregated/sectorial series for the period 2005:12-2018:4. We extend the model setting proposed by Bernanke, Boivin, and Eliasz (2005) by considering the multiple-policy environment in Turkey. Our findings promote arguments that regard policy rate as a poor indicator of the policy stance in Turkey.