SavedAdd your journal

Journals / Bogazici Journal: Review of Social, Economic and Administrative Studies / 2019 / Cilt: 33 - Sayı: 2

Time-Varying Taylor Rule Estimation for Turkey withFlexible Least Square Method

Esnek En Küçük Kareler Metodu ile Türkiye için Zaman İçinde Değişen Taylor Kuralı Kestirimi

Barış SOYBİLGEN
Burak Alparslan EROĞLU
Pages
122–139
Publication Date
2022-10-11
DOI
—
🏛️Bibliographic metadata and full text access for this article are provided via DergiPark.
DergiPark Record ↗
✨

AI Summary & Key Takeaways

AI Insight
⚡ TL;DR(Too Long; Didn't Read)

By analyzing the period between 2006 and 2019, we clearly show that the monetary policy function of the CBRT changes over time, and using a time-invariant monetary policy rule model would yield misleading results.

📌 3 Key Takeaways

🎯
Objective & Hypothesis:In this study, we estimate a time-varying Taylor rule for evaluating the policy reaction function of the Central Bank of the Republic of Turkey (CBRT).
📊
Key Findings & Data:Even though the Turkish economy has been continuously evolving in the last 15 years, previous studies that analyze the monetary policy rule of the CBRT mainly use time-invariant monetary policy functions.
💡
Conclusion & Impact:By analyzing the period between 2006 and 2019, we clearly show that the monetary policy function of the CBRT changes over time, and using a time-invariant monetary policy rule model would yield misleading results.
🔬Design:Modeling & Simulation
📍Scope:2006 Verileri
⚙️Variables:Domain Parameters

Abstract

In this study, we estimate a time-varying Taylor rule for evaluating the policy reaction function of the Central Bank of the Republic of Turkey (CBRT). Even though the Turkish economy has been continuously evolving in the last 15 years, previous studies that analyze the monetary policy rule of the CBRT mainly use time-invariant monetary policy functions. We propose a flexible two-stage least square regression to deal with both instability and endogeneity problems in the monetary policy functions. By analyzing the period between 2006 and 2019, we clearly show that the monetary policy function of the CBRT changes over time, and using a time-invariant monetary policy rule model would yield misleading results.

Özet

Bu çalışmada, Türkiye Cumhuriyet Merkez Bankası’nın (TCMB) politika fonksiyonunuzamanla değişen bir Taylor kuralı kullanarak değerlendirdik. Türkiye ekonomisi son 15 yıldasürekli değişmesine rağmen, önceki çalışmalar TCMB’nin para politikasını analiz etmek içinzamanla değişmeyen para politikası fonksiyonları kullandıkları görülmektedir. Bu çalışmadapara politikası fonksiyonlarındaki kararsızlık ve içsellik problemlerini çözen iki aşamalı esneken küçük kareler regresyonu geliştirdik. Bu yöntemle 2006 ve 2019 yılları arasındaki periyoduincelediğimizde, TCMB’nin para politika fonksiyonun zaman içerisinde değiştiğini ve zamanladeğişmeyen para politikası kuralı modellerinin doğru olmayan sonuçlar verebileceğini açıkçagösterdik.

🔖

Cite This Article

SOYBİLGEN, B., EROĞLU, B. A. (2022). Time-Varying Taylor Rule Estimation for Turkey withFlexible Least Square Method. Bogazici Journal: Review of Social, Economic and Administrative Studies, Cilt: 33 - Sayı: 2, 122–139. https://ajindex.com/articles/467333

📄 Full Text PDF Viewer

📄

PDF görüntüleyici hazırlanıyor...

References (14)

  1. Akçelik, F., & Talaslı, A. (2020). Market-based monetary policy expectations for Turkey. Central Bank Review, 20(1), 9-19.
  2. Aklan, N. A., & Nargelecekenler, M. (2008). Taylor rule in practice: Evidence from Turkey. International Advances in Economic Research, 14(2), 156-166.
  3. Belloni, A., V. Chernozhukov, et al. (2013). Least squares after model selection in highdimensional sparse models. Bernoulli 19(2), 521–547.
  4. Bulut, U. (2016). How far ahead does the Central Bank of the Republic of Turkey look?. Journal of Central Banking Theory and Practice, 5(1), 99-111.
  5. Carvalho, C. and F. Nechio (2014). Do people understand monetary policy? Journal of Monetary Economics 66, 108–123.
  6. Civcir, I., & Akçağlayan, A. (2010). Inflation targeting and the exchange rate: Does it matter in Turkey?. Journal of Policy Modeling, 32(3), 339-354.
  7. Çiçek, S. (2013). Asymmetry and non-linearity in monetary policy of a small open economy: evidence from Taylor rule. International Research Journal of Finance and Economics, 107, 140-153.
  8. Clarida, R., J. Galı, and M. Gertler (1998). Monetary policy rules in practice: Some international evidence. European Economic Review 42(6), 1033–1067.
  9. Erdem, E., Bulut, U., & Kocak, E. (2017). Have financial stability concerns changed the priority of the Central Bank of the Republic of Turkey?. Studies in Business and Economics, 12(2), 35-45.
  10. Gozgor, G. (2012). Inflation targeting and monetary policy rules: further evidence from the case of Turkey. Journal of Applied Finance and Banking, 2(5), 127. Güney, P. Ö. (2016). Does the central bank directly respond to output and inflation uncertainties in Turkey?. Central Bank Review, 16(2), 53-57.
  11. Hansen, L. P. (1982). Large sample properties of generalized method of moments estimators. Econometrica: Journal of the Econometric Society, 1029–1054.
  12. Kalaba, R. and L. Tesfatsion (1988). The flexible least squares approach to time-varying linear regression. Journal of Economic Dynamics and Control 12(1), 43–48.
  13. Kara, H. (2008). Turkish Experience with Implicit Inflation Targeting. Central Bank Review, 8(1), 1-16.
  14. Kara, A. H. (2015). Interest Rate Corridor and the Monetary Policy Stance (No. 1513). Research Notes in Economics No. 2015-13, Central Bank of the Republic of Turkey. Kara, H. (2016). Turkey's experience with macroprudential policy. BIS Papers No. 86, 123- 140. Kayhan, S., T. Bayat, and A. Koçyiğit (2013). Enflasyon hedeflemesi rejiminde öğrenme süreci ve asimetri: Markov switching yaklaşımı. Eskişehir Osma