A brief assessment of Turkey's macroprudential policy approach: 2011e2015

Abstract

The predominant role of cross borderŞnancial flows for macroeconomic and Şnancial stability hasimposed complex policy trade-offs for emerging economies, especially after the globalŞnancial crisis.This note provides a brief account of the macroprudential policy approach adopted in Turkey betweenthe years 2011 and 2015, a period when global capitalflows exhibited unprecedented volatility. Specialemphasis is put on the use of monetary policy tools for macroprudential purposes. WeŞrst highlight theparticular role of externalflows and the associated tradeoffs in designing the monetary policy andmacroprudential policy framework. Next, we describe the policy implementation by the central bank andthe regulatory authorities, and evaluate the consequent outcomes. Our analysis suggests that macroprudential policies have improved external balances, dampenedŞnancial ampliŞcation channels, andreduced the sensitivity of the Turkish economy to capitalflows.© 2016 Production and hosting by Elsevier B.V. on behalf of Central Bank of The Republic of Turkey. Thisis an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).