EconPapers    
Economics at your fingertips  
 

Measuring the Impact of Monetary Policy on Asset Prices in Turkey (Turkiye�de Para Politikasinin Finansal Varlik Fiyatlari Uzerine Etkisi)

Murat Duran (), Gülserim Özcan, Pınar Özbay Özlü and Deren Ünalmış

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: The transmission of policy decisions to financial markets is an integral part of the monetary transmission mechanism. However, one of the major problems in estimating the effect of monetary policy on asset prices is the simultaneous response of policy actions and the asset prices to each other. Rigobon and Sack (2004) suggest a heterokedasticity-based generalized method of moments (GMM) technique to overcome this problem. For emerging markets, there are very few studies using this method. This study applies the heteroskedasticity-based technique to estimate the impact of monetary policy on the Turkish bond, currency and stock markets. This technique also addresses the omitted variables problem. The empirical results verify the findings obtained by event study methods in earlier studies. Firstly, the impact of monetary policy on market interest rates is found to be positive, which diminishes with maturity for maturities longer than 9 months. Secondly, the results suggest that a rise in the policy rate leads to a moderate appreciation of the domestic currency, where the TL/EUR rate is affected more significantly compared to the TL/US dollar rate. Finally, the results show that an increase in the policy rate leads to a decline in stock prices, and monetary policy has the greatest impact on the share prices of the financial sector firms.

Keywords: Monetary Policy; Asset Prices; Identification through Heteroskedasticity (search for similar items in EconPapers)
JEL-codes: E43 E44 E52 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-ara, nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN ... g+Paperss/2010/10-17 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:1017

Access Statistics for this paper

More papers in Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey Contact information at EDIRC.
Bibliographic data for series maintained by Sermet Pekin () and Ilker Cakar () and ().

 
Page updated 2025-03-20
Handle: RePEc:tcb:wpaper:1017