Politika Faizinin Etkinliği: Türkiye Üzerine Gözlemler
The Effectiveness of Policy Interest Rate: Observations on Turkey

Summary/Abstract: The interest rate is one of the important indicators of economic stability and the main variables in intense interaction with macroeconomic indicators. There are many factors affecting the interest rate. The monetary policy practices of the central bank is also one of these. As of September 2021 in Turkey, the Central Bank has started the process of reducing the policy rate. It reduced it by 500 basis points in total in four months, bringing it to 14%. In the course of time, the market interest rates and policy interest rates were observed to have not behaved in the same direction as expected. In this study, by using monthly data for the period 2010:05-2022:05 in Turkey, the factors causing the divergence between the policy rate and market interest rates were examined with the time-varying causality test method. According to the results, the exchange rate variable ranks first among the factors restraining the downward movement of credit interest rates. This is followed by inflation, CDS premium and LIBOR rate. The most important factor causing the benchmark interest rate is again the exchange rate. The CDS premium and the LIBOR rate are other affecting factors. The results indicate that it is extremely strong to achieve the desired economic targets by changing the policy rate without considering the other economic, political, and legal components, especially the exchange rate and inflation.

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