The Effectiveness of Monetary Policy Instruments Applied for Financial Stability in Turkey

Abstract

As a result of the financial problems that emerged with the 2008 global crisis, central banks have developed non-traditional monetary policies within macroprudential policies due to protect the financial structure. In this context, the Central Bank of the Republic of Turkey (CBRT) has established a new monetary policy framework covering financial stability as of 2010. The aim of this study is to analyze the effectiveness of monetary policy tools applied for financial stability in Turkey. In the study, the effectiveness of monetary policy instruments applied for financial stability in the period 2010-2016 was analyzed within the VAR model. According to the results of the study, a meaningful causality relationship was found between the instruments of monetary policy applied to financial stability and the variables of financial stability. The findings of the analysis show that monetary policy instruments used by the CBRT within the new monetary policy have contributed to financial stability when used together.