It is known that periods of high uncertainty in a country have significant effects on economic activities. Therefore, monetary policymakers should consider the degree of uncertainty in the decision-making process. In Turkey, changing the form of government from the parliamentary system to a presidential system in 2018, combined with the global Covid pandemic that started in 2020, caused an extraordinary increase in uncertainty and became one of the main sources of economic problems in the country. This study quantifies the effects of uncertainty on the Turkish economy through an SVAR model estimated with Bayesian techniques. The results show that high uncertainty has a negative and significant effect on economic activities, mainly with the decrease in consumption and investment expenditures. The Central Bank of the Republic of Turkey reacts to these developments with an expansionary monetary policy that injects liquidity into the economy. However, it should not be overlooked that such a policy has limitations due to its long-term negative effects.
This study investigates the relationship between foreign direct investment (FDI) and macroeconomic stability for Turkey. To represent the macroeconomic stability, two main variables are examined. The first of these is inflation rate that represents the economic stability in real sector and the second one is real exchange rate representing the stability in the financial sector. In addition to these variables, the market size, openness to trade and financial development variables are also used as control-transmission variables. Used data are monthly and cover the period from January 2003 to April 2015. Empirical methods used in the study are unit root tests, cointegration analyses, vector error correction model (VECM) and Granger causality test. Obtained empirical results show that fluctuations in inflation and the real exchange rate have a negative and permanent effect on FDI, meaning that instabilities that occurred in real and financial markets negatively affected the inward FDI. Therefore Turkey, which has enough potential to attract FDI, has to provide stability in its macroeconomic indicators to attract a higher volume of FDI.
Currency substitution is an important phenomenon that has emerged with the liberalization of economies. In the Turkish economy, the studies about the currency substitution have gained momentum as a result of the extreme depreciation of the domestic currency in early 2000s. Switching to the flexible exchange rate system practice after the 2000-2001 crisis and putting into implement the inflation targeting strategy since 2005 have significantly reduced the currency substitution rate. Since 2014, the depreciation of domestic currency has made the currency substitution phenomenon a current issue again. This study analyses the main determinants of currency substitution phenomenon by considering the demand for money in the context of Turkey. Developed empirical model is estimated by using ARDL methodology for 2003-2016 periods by using monthly data obtained from Turkish economy. Estimation ISSN 2162-4860 2017 http://ber.macrothink.org 147 results indicate that interest rate differential is an important variable in the process of currency substitution in Turkey. Besides, estimation results also support the existence of a strong ratchet effect in the allocation of deposits between local and foreign currencies. These results together show that strong policies with higher credibility should be pursued with a longer period of time to make reverse currency substitution in effect and to assure economic units to turn back local currency denominated deposits. Business and Economic Research
In this paper, we investigate competition in the Turkish banking sector over the period [2003][2004][2005][2006][2007][2008][2009][2010][2011][2012]. To understand the competitive conditions in the Turkish banking sector, we use the well-known Panzar-Rosse model based on a nonstructural estimation of the Hstatistic by employing the quarterly panel data set. The empirical evidence indicates that the Turkish banking sector operates under conditions of monopolistic competition. Therefore, although there have been growing structural changes in the Turkish banking sector since the 2000s, there has been no remarkable change in the market structure of the Turkish banking sector compared to previous studies, and it can still be characterized by monopolistic competition.
This study examines the degree of exchange rate pass through (ERPT) into producer prices and consumer prices in Turkey. To see the effect of ERPT, recursive vector autoregressive (VAR) model on monthly data from January 2002 to November 2014 is used. Model includes six variables which are oil prices that represent supply shock, industry production index representing demand shocks, reserve money representing monetary policy, nominal exchange rate and CPI-PPI indices. Obtained results show that although there is a pass through from exchange rate to consumer and producer prices, its degree is not as effective as prior to 2001. This means that policymakers have more power for pursuing independent monetary policy.
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