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ERC WORKING PAPERS

Global Constraints on Central Banking: The Case of Turkey

Ahmet Benlialper and Hasan Cömert

Abstract:
This study aims to evaluate the developments in Turkish monetary policy after 2002 and understand the constraints on the effectiveness of the Central Bank of the Republic of Turkey (CBRT). The CBRT has significantly altered its monetary policy in response to the crisis. It became much more experimental and aware of challenges it faced. However, the Bank’s ability to exert influence on key variables seems to have been restrained by factors outside of its control. Financial flows exert great influence on key macroeconomic variables that the Bank monitors closely. Furthermore, energy prices are among the key determinants of inflation in Turkey. As a result, the Bank’s influence on growth and inflation through intermediate variables became a daunting task. The magnitude and direction of flows seem to be mainly related to global risk perception determining the worldwide liquidity conditions rather than to domestic factors. Under these conditions central banks may not set their official interest rates independent of interest rates in advanced countries. Indeed, our VAR analysis exercise supports this argument for the Turkish case. Existing policy framework would not produce desired outcomes unless the sources of the problems such as financial flows as the main global constraints on monetary policy are addressed in a much more serious manner.

2015

  • 15/13 Global Constraints on Central Banking: The Case of Turkey
    Ahmet Benlialper and Hasan Cömert

  • 15/12 Intergenerational Educational Mobility in Turkey
    Aysıt Tansel

  • 15/11 The Myth of Profit-Shifting Trade Policies
    Onur A. Koska and Frank Stähler

  • 15/10 Emerging Markets Sovereign Bond Spreads, Credit Ratings and Global Financial Crisis
    Erdal Özmen and Özge Doğanay Yaşar

  • 15/09 The impacts of the 2008 global financial crisis on developing countries: the case of the 15 most affected countries
    Hasan Cömert and Esra Nur Uğurlu

  • 15/08 Is There an Informal Employment Wage Penalty in Egypt?
    Aysit Tansel, Halil Ibrahim Keskin and Zeynel Abidin Ozdemir

  • 15/07 Resources on the Stage: A Firm Level Analysis of the ICT Adoption in Turkey
    Derya Fındık and Aysıt Tansel

  • 15/06 Intangible Investment and Technical Efficiency: The Case of Software-Intensive Manufacturing Firms in Turkey
    Derya Fındık and Aysıt Tansel

  • 15/05 Southwest as the New Internal Migration Destination in Turkey
    Ali T. Akarca and Aysıt Tansel

  • 15/04 2002 Sonrası Türkiye Ekonomisinin Performansı: Karşılaştırmalı Bir Analiz
    Ahmet Benlialper, Hasan Cömert and Güney Düzcay

  • 15/03 Inequality of Opportunities of Educational Achievement in Turkey over Time
    Aysıt Tansel

  • 15/02 Unemployment and Labor Force Participation in Turkey
    Aysıt Tansel, Zeynel Abidin Ozdemir and Emre Aksoy

  • 15/01 Determinants of Transitions across Formal/Informal Sectors in Egypt
    Aysit Tansel and Zeynel Abidin Ozdemir
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