Economic Growth of Monetary Policy Applications Analysis of the Effect on It by Vector Autoregressive Model Approach: The Example of Turkey During 2006-2022

Abstract

The aim of this study is to measure the effect of monetary policy and monetary policy instruments, which are a serious discussion topic in the Turkish economy, on long-term economic growth. It is very difficult to observe the long-term effects of monetary policies, whose positive or negative effects can be observed very easily in the short term. Therefore, it is essential to monitor these long-term effects at the stage of determining the appropriateness of the monetary policy used. Within the scope of this study, it has been observed whether the monetary policy implemented in the Turkish economy, where the debates on the independence of central banks and monetary policies are spread over wide areas, are suitable for the determined objectives. Findings obtained as a result of econometric analysis covering the period 2006-2022 using quarterly frequency data show that the monetary policy used has a significant effect on economic growth in the long run. According to the results of the obtained cointegration equation, the increase in the interest rate and M3 money supply affects the economic growth negatively; the increase in the US dollar exchange rate affects the economic growth positively. According to the results of Granger causality analysis, M3 Money Supply and Interest is the Granger cause of GDP. There is both a short-term and a long-term relationship between these variables. The study will contribute to the literature with its results and suggestions.