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The monetary transmission mechanism shows through which channels and to what extent the monetary policy implemented by the central banks affects the production level and inflation. Fundamentally, the monetary transmission mechanism, which operates through the traditional interest rate channel and includes the exchange rate, credit, asset prices and expectations channels over time, is a rather difficult and complex structure to understand. In order for central banks to implement an effective monetary policy and to determine the appropriate set of tools within the framework of this policy, it is important to understand this complex structure in the best way possible. In this study, the functioning of the channels of interest rate, credit, exchange rate and asset prices, which are among the channels of monetary transmission mechanism, and which of these channels are more effective in the period 2007:10-2022:06 in Turkey, were examined using the Diebold-Yılmaz (2012) Spillover Analysis method. Analysis findings show that the effect of the credit channel on production and the exchange rate channel on inflation is greater. [ABSTRACT FROM AUTHOR]

Although the 2008 global financial crisis has radically changed monetary policies, it is seen that the Taylor Rule still has a wide place in practice. The aim of this study is to examine the reaction function of the Central Bank of the Republic of Turkey with the Extended Taylor Rule model for two sub-periods. In this way, it is determined how sensitive the monetary policy in Turkey has changed in the post-crisis period to which macroeconomic variables. For this purpose, monetary policy for the period 2011:04-2019:07 was modeled with the extended Taylor Rule and estimated with the linear Vector Autoregressive (VAR) method. In the analysis, it is divided into two sub-periods according to the CBRT presidents. The period between 2011:04-2016:03 represents Erdem Basci, and the period between 2016:04-2019:07 represents the Murat Cetinkaya period. The data used in the econometric analysis are the CBRT weighted average funding cost, inflation rate, industrial production index and USD/TL exchange rate. According to the impulse response analysis, the main findings are that the CBRT reacts increasingly to a shock in the exchange rate in both periods and does not react to a shock in the industrial production index. The severity of the shocks is different in the two periods. In the Cetinkaya period, the interest rate reacted more severely to the fluctuations in the exchange rate compared to the Basci period. Variance decomposition also supports this result. In the Cetinkaya period, the share of the exchange rate in the variance of the interest rate is higher. As a result, the reaction function reacts differently to different variables in both sub-periods. [ABSTRACT FROM AUTHOR]

The aim of this study is to analyze the main determinants of carry trade activity for Turkey, England and the USA in the periods when global risk perception is high and low. From the results of TVAR model, we concluded that interest rate differential is the main factor behind carry trade activity in the periods when global risk perception is high and low. We found that exchange rate uncertainty is an element that leads to giving up carry trade activity in the period when global risk perception is high while it doesn't have any significant effect in the period when global risk perception is low in Turkey and England. However, we determined that investors in the USA continue to carry trade activity although exchange rate uncertainty rises. [ABSTRACT FROM AUTHOR]

The main target of this study is to estimate the determinants and their effect on incentives implemented in the electrical energy sector in Turkey. The data of the study covers 60 quarters between 2005 and 2019. While the dependent variable is investment incentives, the independent variables of the study are separated, classified, and tested under three different models. The first model includes economic variables (GDP, interest rate, exchange rate, inflation, export, and import), the second model includes production and investment variables (tariff price, industrial production index, total installed power, gross fixed capital formation), and the third model contains the demand determinant variables (production of the incentive plants, electricity gross demand, peak sudden). Moreover, the dummy variable was included in the study for the 2008 Global Financial Crisis. The results of the ARDL Boundary Test showed that in the long run, GDP and Exchange Rate variables were seen to have the most significant impact on incentives, respectively, where these effects were positive in the case of GDP and negative for the Exchange Rate. These were followed by the 2008 Global Financial Crisis. It is recommended that policymakers should always consider the negative effect of the exchange rates on the incentive system in their long-term planning. [ABSTRACT FROM AUTHOR]

Liquidity management has an important place in the asset and liability management of banks. The aim of this study is to empirically investigate the intra-bank and macroeconomic factors that affect liquidity in 20 Turkish commercial banks. Financial data of commercial banks operating in the 2002-2022 period and macroeconomic data for the same period are taken into account. In the panel data analysis where liquidity ratios liquid asset ratio (LAR), acid-test ratio (ATR) and current ratio (CR) were taken as dependent variables, a negative relationship between liquidity ratios and deposits to liabilities ratio (DR), financial asset ratio (FAR), fixed asset ratio (FIXR), economic growth rate (gross domestic products - GDP), central bank interest rate (INT), loans to assets ratio (LR), net interest margin (NIM), non-performing loans ratio (NPL); a positive correlation with liquidity ratios and equity ratio (equities to assets ratio, CAP), inflation rate (INF), natural logarithm of asset size (TA), foreign exchange rate (XR) was found. In the study, no statistically significant relationship was found between foreign exchange liquidity ratio (FXLR) and liquidity ratios. Despite its profitabilityreducing effect, banks need to manage their liquidity sensitively and effectively in order to maintain the trust of customers and market, especially during crisis periods. [ABSTRACT FROM AUTHOR]

The exchange rate is considered one of the most important economic factors that monetary authorities seek to control in proportion to its current and its future economic activities. In this study, we investigate the interrelationship between the interest rate and exchange rate at different time horizons (overnight, 6 months and up to 1 year) in Turkey using wavelet analysis, mainly continuous wavelet, cross wavelet, and wavelet coherence, during the period from 2005 to 2019. The results indicate that the relationship in the long‐run and short‐run between exchange rate and interest rate is generally positive and this confirms the purchasing power parity theory and Keynesian approach theoretical predictions on the relationship between exchange rate and interest rate—the negative relationship in the short term is consistent with sticky price models. In terms of the causality, although there is no specified pattern for this relationship, it is evident that the behavior of the lead‐lag relationship between the variables, in the long run, is different from the short run, the exchange rate dominates in the long run. In contrast, in the short‐run, there is a bidirectional causality that varies substantially over time and virtually changes from day to day in the short‐run. [ABSTRACT FROM AUTHOR]

Businesses that ensure the functioning of the economy have tried to develop various policies in the axis of the concept of sustainability on issues such as the efficient use of natural resources and the waste problem in industrial production. Within the framework of these policies, the creation of the Sustainability Index in Borsa Istanbul in 2014 contributed to the development of policies in the field of sustainability in Turkey. In this context, the aim of this study is to analyze the effect of the macroeconomic variables selected in the study on the volatility of the BIST Sustainability Index. In the study, Brent oil, the ratio of deposits opened in TL to total deposits and exchange rate variables were used. Brent oil, one of these variables, is included in the study because it is an important input for industrial production. As another variable, it has been added because the change in the ratio of deposits opened in TL to total deposits affects the investment financing costs of the shares valued in the BIST Sustainability Index. Exchange rate is included in the study because it is one of the important variables affecting foreign trade. Data were used weekly between 7.11.2014-13.8.2021. The E-GARCH model was chosen as the econometric model in the study. As a result of the study, it was seen that the Brent oil variable did not affect the BIST Sustainability Index volatility, the exchange rate variable increased the volatility of the index and the interest rate variable decreased the volatility. [ABSTRACT FROM AUTHOR]

There are some tax security measures in the Corporate Tax Law practice in Turkey. One of these tax security institutions, "Thin Capitalization", is regulated in Article 12 of the Corporate Tax Law No. 5520. The aforementioned regulation is based on the principle that the debts borrowed by the institutions from their partners or persons related to the partners, exceeding three times the equity capital of the institution at any time during the accounting period, is not considered as a borrowing, but as a capital that has been put into the institution in disguise. According to this practice, it is not possible to consider the part of the negative exchange rate differences that arise due to the increases in foreign exchange rates, which corresponds to the thin capitalization, as an expense in the determination of corporate earnings, regarding the interests corresponding to the said borrowings, which are accepted as capital, and foreign currency borrowings. In parallel with this, the part of the positive exchange rate differences that arise as a result of the decrease in exchange rates, which corresponds to the thin capitalization, should not be taken into account as foreign exchange profit in determining the corporate income. The purpose of this study is to evaluate the foreign exchange borrowings and exchange differences obtained from partners or related parties in order to meet the financing needs of institutions within the thin capitalization. [ABSTRACT FROM AUTHOR]

The Credit Default Swap (CDS) premium expresses the risk ratings and investment capability of the countries. Investors who can correctly estimate the CDS premium can transfer their funds to reliable countries and correct sources. In this study, it is aimed to estimate the CDS premium of Turkey by Adaptive Neural Fuzzy Inference System (ANFIS) method. In the study, “exchange rate”, “credit rating”, “interest rate”, “stock price”, “stock volatility” and “stock return” values were considered as input variables. All data in the study were obtained on a daily basis and covers the period of 2015-2020. As a result of the ANFIS input selection analysis, it was found that the input variables that have the greatest impact on estimating the CDS premium are “exchange rate”, “stock price” and “interest rate”. The ANFIS model was trained with the training dataset containing these input variables, and estimates were obtained for the future CDS premium values for the test data set that the model had never seen before. As a result of the analysis, it has been determined that the CDS premium estimation values are quite close to the actual CDS premium values. Therefore, it can be said that the ANFIS model predicts CDS premiums in Turkey quite well. With this study, it is aimed to inform investors and policy developers about the values that CDS premiums can take in the following periods. [ABSTRACT FROM AUTHOR]

In recent years, there has been a high level of volatility in the exchange rates and interest rates in Turkey. This study analyzes the effects of these two variables on the returns of stocks in different sectors in Borsa İstanbul. Regression analysis was performed in accordance with the random effects and fixed effects models, in which 46-quarter panel data set belonging to 348 shares between 2009 and 2020 were used. The market return control variable was used in the study and the effects of industry-related characteristics on stock returns were analyzed. According to the findings, it is seen that the appreciation (depreciation) of the USDTRY exchange rate has a negative (positive) effect on companies in the banking, leasing, communication, and construction sectors. When the relationship between interest rates and returns of stocks in various sectors is analyzed, it is found that there is no significant relationship. [ABSTRACT FROM AUTHOR]

By applying the model EGARCH between 2017 and 1970. Political Instability and volatility of economic indicators in Turkey were examined. As indicators of political instability; The local elections, general elections, coalition periods, referendum periods, terror lace, strikes, coups and coup attempts, annual figures and puppet variables related to exports, imports and interest-e were used. According to the findings, political instability was found to have a positive effect on the Exchange Rate and a negative effect on the GDP. [ABSTRACT FROM AUTHOR]

This research aimed to study the evolution of the inflation rate, the quantity of money supply, exchange rate, interest rate and GDP, stability test in Turkey, measuring the effect of independent variables in the dependent variable (inflation rate) The second hypothesis: there is an effect of the exchange rate on inflation in Turkey, and the third hypothesis: there is an effect of the interest rate on inflation in Turkey, and the fourth hypothesis: There is an impact of the domestic output Total on inflation in the study data were obtained using the following sources: Reports issued by the World Bank, International Monetary Fund, World Trade Organization, various international political and economic organizations, and various Arab and foreign references (letters, books, diaries, reports, etc). The results of the research: Turkey's growth rose from %2.9in 2014to %4.2in 2015. It is much higher than expected, despite the geopolitical tensions (the violence in southeastern Turkey and the refugee crisis emanating from Syria), and the low rate Inflation in Turkey from %8.85in 2014to %7.67in 2015. The relationship between inflation and the quantity of money supply in Turkey is also positive and the correlation between inflation and exchange rate is positive and the relation between inflation and the quantity of money supply in Turkey, That the positive relationship between inflation and GDP in Turkey [ABSTRACT FROM AUTHOR]

Carry trade is a speculative financial transaction and a leveraged exchange rate position. Thus, a sudden unwinding in carry trade position leads to a sharp depreciates in the high-interest currency and to increase exchange rate volatility. It can cause global imbalances and financial crises and therefore it can ensue as a source of financial fragility and instability. In this study, we examined effects of unwinding of carry trade on financial variables in regimes when interest rate differential and TL/USD exchange rate volatility are high and low, over the period of January 2005-September 2017 in Turkey. From the results of this study, we concluded that a sudden unwinding of carry trade position led to decrease of interest rate and BİST 100 return and increase of inflation rate in regimes when interest rate differential is high and low. So-called unwinding led to depreciate Turkish Lira and decrease of BİST 100 return in regimes when exchange rate volatility is high and low. [ABSTRACT FROM AUTHOR]

Hot money flows refer to short-term foreign currencies entering the country's economies through short-term loans and portfolio investments. The purpose of the study is to determine the impact of hot money flows in Turkey on stock exchange index, exchange rates and interest rates. For this purpose, BIST-100 Index closing values, US dollar exchange rates and five-year Treasury bond interest rates were considered to explain hot money data. The data are in an annual frequency and the analyses were made for the period between 1989 and 2019. The structural equation model was applied in the study. The model fit index values that helped to determine the success rate of the established model was examined before passing on to the analysis. According to the model fit index values, it was determined that the model was compatible with the data. It was found that hot money has a positive effect on the stock exchange index and a negative effect on interest rates and exchange rates. [ABSTRACT FROM AUTHOR]

This paper empirically investigates the effects of monetary policy shocks on the Turkish economy using a structural VAR model. Monetary policy shocks are identified based on the non-recursive structural identification scheme. Since monetary policy stance is contingent on different funding rates in the wide interest rate corridor for the selected sample period, 2011:M1-2018:M12, this paper employs "weighted average funding cost"to represent the monetary policy stance of the CBRT. The baseline identification scheme is also extended in different ways to check the robustness of the results. The empirical results can be summarized as follows. First, Turkish data are not free from price and exchange rate puzzles. More importantly, qualitative inferences are quite persistent across different identification restrictions. Second, structural impulse-responses reveal that there is a two-way simultaneous interaction between monetary policy and exchange rate. Finally, the presence of money stock in the VAR model is redundant for identifying monetary policy shocks since the VAR models with and without money stock generate almost identical results. [ABSTRACT FROM AUTHOR]

This study attempts to establish the possible existence of the long-run interrelationship between interest rates, inflation, and exchange rates in five EMEs (Brazil, India, Indonesia, South Africa, and Turkey), what is so-called by Morgan Stanley 'Fragile Five'. To do so, we utilize Li and Lee's [2010. "ADL Tests for Threshold Cointegration." Journal of Time Series Analysis 31 (4): 241–254.] Autoregressive Distributed Lag test for threshold cointegration and apply it to the sample country's time-series data from 2013:m1 to 2018:m12. Overall, our results are threefold: First, there seems to be a long-run positive relationship between actual rates of inflation and nominal interest rates supporting the validity of the ex-post Fisher hypothesis for all the sample countries. Second, the results support the presence of a cointegrating relationship between interest rates and exchange rates for Brazil, India, and Turkey but not for Indonesia and South Africa. Lastly, without exception, exchange rates and actual rates of inflation in all the sample countries tend to co-move in the long-run, implying that the depreciation of their currencies creates an inflationary effect on domestic prices through raising the prices of imported goods. The results above are widely consistent with both theoretical expectations and the relevant empirical literature. [ABSTRACT FROM AUTHOR]

The acceleration of capital inflows as a result of the globalization of finance causes excessive fluctuations in exchange rates and increases uncertainty about exchange rates, making it difficult to make predictions. According to theoretical knowledge, there is a close relationship between exchange rates and interest rates and it is possible to limit the fluctuations in exchange rates through monetary policy in countries where capital movements are highly sensitive to interest rates. The aim of this study is to question empirically the impacts of monetary policy interest rates and market interest rates on exchange rates in Turkey's. In this context, the dynamic relationships between the exchange rates and interest rates in Turkey were investigated by using monthly data for the period through 2011:01-2018:05 with VAR method and the ARDL cointegration test. The results indicate that there is no significant relationship between the CBRT's official policy interest rates (policy rate and average funding cost) and the nominal exchange rate either in the short or long term. On the other hand, there is a positive correlation between the benchmark bond rate and exchange rate. When the results are evaluated, it is understood that the central bank may affect the exchange rates indirectly by directing the market interest rates with the official interest rates. [ABSTRACT FROM AUTHOR]

The main purpose of this study is to investigate the factors that the impact of macroeconomic variables, which is effective on money demand and the stability of the money demand function in Turkey. The analysis covers the period after the 2008 financial crisis, where there was powerful monetary easing in developed countries (2008-2018). In the study, the M2 money supply is preferred as monetary aggregates. Variables that are investigated the effect are real income, interest rate and exchange rate. ARDL approach and CUSUM-CUSUMSQ test are used as methods. The analysis is performed with quarterly data. According to the results of the analysis, real income and exchange rate have a positive effect and the interest rate has a negative effect on money demand in the long term. In the short term, while the effect of real income and exchange rate on money demand continue, the effect of interest rate is disappeared. [ABSTRACT FROM AUTHOR]

With this study; the construction sector in Turkey, which is thought to have an effect on the real effective exchange rate, interest rate of housing loan and economic growth are aimed to determined the relationships between variables. For this purpose Turkey the 2002Q1-2019Q2 quarter model generated using data from the same level of the variables (first difference) of the variable due to the stable detection of whether they are cointegrated with each other was investigated using johansen cointegration test, and according to test results; it is concluded that the share of the construction sector in GDP is a cointegration relationship between real effective exchange rate, interest rate of housing loan and economic growth variables. Then the direction of the relationship between the variables in the model was determined by the block exogenetiy wald granger test. That the construction sector is the granger cause of both economic growth and housing loan interest rates; interest rates to exchange rates; a causality. Also, the examination of the construction sector's current status compared with historical data has been determined to be used as individual indicators. Finally, it has been determined that the policy rate cuts that the central bank of Turkey (24%, 19.75%, 14%) has gradually taken since the end of July 2019 has positive effects on the consruction sector which has contracted in 2018. Consequently salt than growth Turkey; that the sustainable and stable growth should take importance to other sectors as important to the construction sector to be based on the strong foundations in a positive position a model that focuses on a single center of growth can create a problem for the future of economic growth. [ABSTRACT FROM AUTHOR]

The problem of unemployment has special importance because of its economic and social dimensions. That also has become a chronic economic problems for Turkey's economy and continuing the fight against unemployment for special measures to be taken, it reveals the importance of the unemployment problem for Turkey's economy. In this study, the macroeconomic determinants of unemployment in Turkey has tried to be analyzed for 2005.1- 2018.11 period. In the study, the determinants of the number of unemployed were analyzed by using the ARDL model as well as DOLS, FMOLS and Threshold regression models. According to the findings of the ARDL model, industrial production affets negatively the number of unemployed people in line with expectations, and the CPI and interest rate affects positively. The real effective exchange rate affects the number of unemployed positively, but its coefficient is statistically insignificant. FMOLS, DOLS and Threshold Regression models have also similar results with the ARDL model for Turkish Economy. [ABSTRACT FROM AUTHOR]

The main objective of the study is to determine financial relations between principal macro-economic indicators in Turkey empirically. In this respect, it is necessary to examine whether there is a pass-through effect of inflation and interest rate on the exchange rate and to examine the relation between inflation and interest rate. The period between April 2018 and January 2003 is used in the analysis, data on average monthly exchange rate, inflation and interest rates. In the study, cointegration analysis was done with ARDL bound test approach and then was done also causality analysis with Toda-Yamamoto test. According to the findings obtained from the study it has been found to be unidirectional causality from exchange rate to inflation and interest rates. According to the results, the effect of the exchange rate on the interest rate and inflation is valid. On the other hand according to the findings it has been identified cointegration relationship between interest rates and inflation in Turkey and concludes that the verification of the Fisher hypothesis has been reached. [ABSTRACT FROM AUTHOR]

The aim of this study is to analyze the relationship between consumer loans and some macroeconomic variables between 2006:Q1 and 2018:Q2 quarter periods in Turkey. In this context; consumer loans, inflation, exchange rate, interest and money supply variables were used. Firstly, the stability of variables are analyzed that structural non-breaking unit root test (ADF, PP) and a structural break (Zivot-Andrews) unit root test. Whether or not there is a long-term relationship between the variables was investigated by the Gregory- Hansen structural fracture cointegration test. The direction of causality between the variables was examined with Toda-Yamamato causality test. In Toda-Yamamoto causality test, it is seen that there is a bidirectional causality relationship between interest rate and consumer loans. In addition, the one-way causality relationship from money supply to consumer loans has been determined. [ABSTRACT FROM AUTHOR]

In general, monetary policy changes have a strong impact on financial markets and real economy through various channels, among others the interest rate channel, credit channel, exchange rate channel and asset price channel. This process through which monetary policy decisions impact on an economy in general and the interest rate in particular is known as the monetary policy transmission mechanism. Hence monetary authorities are supposed to know the relationship between monetary aggregates and interest rates in a certain monetary policy regime and the determinants that affect this relationship. The purpose of this paper is to analyze the interest rate channel in Turkey from the perspective of monetary policy transmission channel. The results from our empirical analysis, using quarterly data and applying the VAR model during the period between 2000:1 and 2011:3, it is suggest that traditional transmission mechanism works properly in Turkey. [ABSTRACT FROM AUTHOR]

The aim of study is to observe the effect of variables included in the equation of Taylor Rule, which is also known as central bank reaction function on interest rate movements. While central banks do settings on interest rates, they will either raise or reduce or leave interest rates stable. This condition, which we can name as interest rates movements, was considered as the raise, reduction or stabilization of interest rates compared to previous period. In our study, estimations were done with multinominal probit models in order to observe the effects of inflation gap and output gap on the possibility of these movements of interest rates. Moreover, currency gap was included among the variables in the rule as well in order to observe whether it is important in the explanation of interest rate movements whose necessity is still being discussed. Findings show that inflation gap is more important than output gap on the possibility of raise or reduction of interest rates in Turkey and that inclusion of currency in the model is effective, however when it does not give adequate explanatory information in the sense of rule when it is compared with other variables. [ABSTRACT FROM AUTHOR]

In this article the relationship between FDI inflow to Turkey and Turkey’s export performance is analyzed. The lack of studies in Turkey about this issue constitutes the main motivation behind this study. The effect of FDI on exports was analyzed through the Granger Causality Test (GCT) (for the period of 1992:1-2009:7) and the VAR Analyses. As a result of the GCT, a unidirectional causality from FDI to exports was found. According to the results of export variance decomposition, it is observed that exports are under the influence of exports' own lagged values. FDI plays 6 percent role in export changes. This finding corresponds to the finding that FDI causes exports. 74 percent of FDI changes arises from FDI, 10 percent from Interest Rates, and 8 percent from Exchange Rate. While Openness Ratio's explanatory level for FDI is 2 percent, other variables are not significant in explaining FDI changes. According to these results, interest rates in the country, exchange rates, and openness ratio are main incentives behind FDI. [ABSTRACT FROM AUTHOR]

Implementation of balanced budget policy has been abandoned in the post-1980 in Turkey. With budget deficits, government’s funding need and debt burden have risen. The process of financial liberalization (1989) supported to government’s fulfillment of funding need. Government’s rising funding need led to fiscal dominance in the economy. Fiscal dominance affects exchange rate and interest rates, and then changes in the exchange rate and interest rate reflects to banking sector. The previous studies indicted that fiscal dominance affects monetary policy via exchange rate and interest rate. This is the first time that in this study the impacts of fiscal dominance are investigated in Turkey. Reel exchange rate and reel interest rate with a different method are used to be endogenous variables in this interaction. It is founded that fiscal dominance via channel of exchange rate and interest rate affects security investments, deposits, loans, and profits of the banking sector. [ABSTRACT FROM AUTHOR]

The objective of this paper is to examine the reasons of current account deficits in Turkey using vector autoregression (VAR) analysis for the period from 1992:01-2007:12. The empirical evidence of the study suggests that real exchange rate, real interest rate and IMKB are most important variables to explain the determinant of current account deficit in Turkey. Also, the effect of national product on current account deficit remains at a low level. [ABSTRACT FROM AUTHOR]

This study analyses the dynamic effects of macroeconomic variables (i.e. gross domestic product (GDP), money supply, short-run interest rates and exchange rates) on the house prices in Turkey for the period 2000-2006. Estimates of the long run relationship between house prices and macroeconomic variables are obtained using the Johansen cointegration test. The results of cointegration analysis suggest that there exists a long run relationship between house prices and macroeconomic variables. Vector Error Correction Model (VECM) is used to investigate of the short-run dynamic relationship between house prices and macroeconomic variables. The results of VEC Granger Causality/Block Exogeneity Wald Test show that there is bi-directional causality between house prices and interest rates and exchange rates. It is observed that one-directional causality exists from gross domestic product and money supply to house prices. [ABSTRACT FROM AUTHOR]