THE IMPACT OF CENTRAL BANK MONETARY POLICY ON VOLATILITY OF OVERNIGHT REPO INTEREST RATES

The purpose of this study is to investigate the volatility of overnight repo interest rates between the periods of 04.01.2010 and 07.04.2014; and thus, to determine whether Central Bank of the Republic of Turkey manages the expectations or not. The overnight repo interest rates containing the periods 2010-2014 are dealt with and it is investigated the volatility by using GARCH, EGARCH, and GJR-GARCH models. It has found out that the optimal model is EGARCH (1,1) model accounting for the volatility of overnight repo interest rates within the conducted models. It has been inferred from the analysis that actual situations are more efficient than expectations. That is, people’s expectations do not come true; and this situation increases the volatility. The fact that actual situations are more efficient than expectations is a result of the fact that Central Bank is managing the expectations.