Taylor Rule in Practice: Evidence from Turkey

Aklan, Nejla Adanur; Nargeleçekenler, Mehmet

doi:10.1007/s11294-008-9148-9

Cited by 19 publications

(3 citation statements)

References 38 publications

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“…The empirical Taylor rule estimated in this paper is a forward-looking one of the following form:where it is the interest rate set by the central bank, and r¯ is the equilibrium real interest rate, which is unobserved and is measured by the constant in the regression as in most studies (e.g. Razzak, 2003; Adanur Aklan and Nargelecekenler, 2008; Belke and Klose, 2009; Judd and Rudebusch, 2020). πt+k and yt+k are the k-period ahead forecasts of inflation and the output gap respectively, and ut is an error term.…”

Section: Empirical Frameworkmentioning

confidence: 99%

Time-varying parameters in monetary policy rules: a GMM approach

Anderl,

Caporale

2024

JES

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PurposeThe article aims to establish whether the degree of aversion to inflation and the responsiveness to deviations from potential output have changed over time.Design/methodology/approachThis paper assesses time variation in monetary policy rules by applying a time-varying parameter generalised methods of moments (TVP-GMM) framework.FindingsUsing monthly data until December 2022 for five inflation targeting countries (the UK, Canada, Australia, New Zealand, Sweden) and five countries with alternative monetary regimes (the US, Japan, Denmark, the Euro Area, Switzerland), we find that monetary policy has become more averse to inflation and more responsive to the output gap in both sets of countries over time. In particular, there has been a clear shift in inflation targeting countries towards a more hawkish stance on inflation since the adoption of this regime and a greater response to both inflation and the output gap in most countries after the global financial crisis, which indicates a stronger reliance on monetary rules to stabilise the economy in recent years. It also appears that inflation targeting countries pay greater attention to the exchange rate pass-through channel when setting interest rates. Finally, monetary surprises do not seem to be an important determinant of the evolution over time of the Taylor rule parameters, which suggests a high degree of monetary policy transparency in the countries under examination.Originality/valueIt provides new evidence on changes over time in monetary policy rules.

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Section: Empirical Frameworkmentioning

confidence: 99%

Time-varying parameters in monetary policy rules: a GMM approach

Anderl,

Caporale

2024

JES

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“…The first group of studies estimates a linear reaction function for the CBRT. For instance, while Berument and Malatyali (2000) found that the CBRT considers past inflation rates rather than expected inflation rates, Adanur-Aklan and Nargelecekenler (2008) concluded that it is concerned with both past inflation and expected inflation rates. Berument and Tasci (2004) found that the central bank deals with only the output gap while Yazgan and Yilmazkuday (2007) concluded that it responds to changes in both expected inflation rates and the output gap.…”

Section: Brief Overview Of the Literature And Contributions Of This Amentioning

confidence: 99%

Does the Central Bank of the Republic of Turkey Respond Asymmetrically to Inflation and Output?

Bulut¹

2019

Margin: The Journal of Applied Economic Research

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This article aims to estimate a forward-looking reaction function for the Central Bank of the Republic of Turkey (CBRT) considering possible asymmetries in the reaction function. For this purpose, it uses quarterly data over the period 2006:1–2018:1 and performs the nonlinear autoregressive distributed lag (NARDL) cointegration test. The findings obtained from the NARDL test indicate that the CBRT has an asymmetric reaction function and considers increases in inflation and decreases in output while adjusting short-term interest rates. Theoretical and practical implications for these findings are also discussed. JEL Classification: C22, E52, E58

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“…First, there are many papers estimating the reaction function of the CBRT in the empirical literature (see e.g., Berument and Malatyali, 2000;Berument and Tasci, 2004;Yazgan and Yilmazkuday, 2007;Adanur-Aklan and Nargelecekenler, 2008;Erdem and Kayhan, 2010;Gozgor, 2012;Bulut, 2016). Among these papers, some add financial variables to the reaction function of the CBRT (Berument and Malatyali 2000;Berument and Tasci, 2004;Yazgan and Yilmazkuday, 2007;Erdem and Kayhan, 2010;Gozgor, 2012).…”

Section: Introductionmentioning

confidence: 99%

Have Financial Stability Concerns Changed the Priority of the Central Bank of the Republic of Turkey?

Erdem

Bulut

Koçak

2017

Studies in Business and Economics

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Abstract:This paper aims at analysing whether the Central Bank of the Republic of Turkey (CBRT), designing a new monetary policy framework to achieve financial stability in the last quarter of 2010, tries to pursue financial stability by putting price stability on the back burner. To this end, a forward-looking reaction function that is extended with nominal exchange rate gap and nominal domestic credits gap is estimated for the CBRT. The paper first performs unit root and cointegration tests and finds that the variables become stationary at first differences and that there is a cointegration relationship among variables. Then, the paper conducts the Kalman filter to obtain time varying parameters. The findings show that the coefficients of all explanatory variables did not change too much after the new monetary policy framework of the CBRT in the last quarter of 2010. Therefore, this paper asserts that the CBRT continues to pursue price stability as its primary goal and tries to achieve financial stability by using macroprudential tools. Thus this paper concludes that financial stability concerns have not changed the priority of the CBRT.

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Taylor Rule in Practice: Evidence from Turkey

Abstract: Turkey, Inflation targeting, Taylor rule, Monetary policy, Reaction function, GMM, E40,

Cited by 19 publications

References 38 publications

Time-varying parameters in monetary policy rules: a GMM approach

Time-varying parameters in monetary policy rules: a GMM approach

Does the Central Bank of the Republic of Turkey Respond Asymmetrically to Inflation and Output?

Have Financial Stability Concerns Changed the Priority of the Central Bank of the Republic of Turkey?

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