Topics in Middle Eastern and North African Economies

Document Type

Article

Publication Date

5-1-2017

Abstract

Following the world financial crisis beginning in the last quarter of 2008, aggregate demand and commodity prices have declined sharply leading to a fast decline in world inflation. This different and new period reflects the rise in risk appetite leading to high fluctuations in the short term capital flows. World central banks revised their monetary policy to the changing conditions taking into account financial stability. In 2002, Turkish central bank adopted inflation targeting (in the implicit form) to maintain price stability. After 2008, following the developments in global markets, Turkish economy reflects similar characteristics in the form of decline in inflation rates. Together with the changes in the economic conditions, estimating monetary policy models in the form of constant-coefficient and symmetric specification may lead to erroneous interpretations. This study analyze the existence of structural break(s) and asymmetric behavior for the 2003-2016 period. The paper also examines the monetary policy model under New Keynesian fashion. Turkish monetary policy investigated for the period presents October 2009 as the break point under different models and structural break tests. Asymmetric reactions to interest rate, output and exchange rate are observed suggesting the different monetary preferences of the central bank of Turkey

Journal Title

Topics in Middle Eastern and North African Economies

ISSN

2334-282X

Publisher

Middle East Economic Association and Loyola University Chicago

Volume

19

Issue

1

Comments

Presentation of the articles in the Topics in Middle Eastern and North African Economies was made possible by a limited license granted to Loyola University Chicago and Middle East Economics Association from the authors who have retained all copyrights in the articles.

Creative Commons License

Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 License.

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