Alternative Explanations for the Monetary Stance of CBRT: Monetary Condition Index (MCI)

25640

Knowledge of economic agent’s expectations enables the policy authorities to evaluate responsiveness of economic and political decisions. Hence, all central banks in the World including the Central Bank of Republic of Turkey (CBRT) want to know public expectations and re-use this knowledge to influence expectations of people especially in implementing interest rate as an instrument. However, considering the stability of economy, central banks try to take into account real variables which are more flexible and effective as policy tools. Moreover, real variables are directly related to welfare of the society. The main aim of this study is to investigate whether the monetary stance of CBRT that bases on policy rules takes into account aggregate demand that impacts growth and price level during past decade. The study employs ARDL approach using time series data obtained from CBRT. The results indicate that CBRT was heavily relied on Monetary Condition Index (MCI) over the past decade contrary to its official discourse.

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Monetary Policy , Monetary Condition Index (MCI) , CBRT , ARDL

Journal Of Management an‎d Economics

85

Journal Of Management an‎d Economics