Author
Avci, S. B., Yücel, Mustafa Eray
Publication Date
2017-08
Publication Place
-
Springer International Publishing
Subject
Interest rate pass-through, Deposit and credit channels, Policy and market rates, Banking sector, Interacted vector autoregressive methodology
Type
Periodical
Language
English
Digital
Yes
Manuscript
No
Library
Özyeğin University
Library Asset ID
1309-422X
Record ID
d16f8254-4d48-4c6e-9048-fc692db99ecb
Library Location
Economics
Date
2017-08
Notes
Due to copyright restrictions, the access to the full text of this article is only available via subscription.
Sample Text
An effective monetary policy framework is often viewed as a pre-condition for well-functioning financial markets. Yet measuring monetary policy effectiveness is not straightforward; it requires empirical work to understand the impact of financial infrastructure, competitiveness of financial markets, and current economic conditions. In particular, monetary policy effectiveness depends on the extent to which the chosen interest rate affects all other financial prices—including the entire term structure of interest rates, credit rates, exchange rates, and asset prices. This paper examines the effectiveness of monetary policy in Turkey by focusing on interest rate pass-through outcomes by way of an interacted vector autoregressive (IVAR) approach. The results suggest that policy-led rate changes are fully transmitted to deposit and credit rates within eight months. Competition in the banking sector (as well as that sector’s liquidity and profitability), dollarization, exchange rate flexibility, inflation, and term structure all have a positive effect on interest rate pass-through; whereas regulatory quality, GDP growth, monetary growth, industrial growth, and capital inflows have a negative effect. Using various tests, we find that the effect of financial development and macroeconomic variables on interest rate pass-through is neither robust nor time-invariant.
DOI
10.1007/s40822-017-0068-y
Cilt
7
