Box B: Turkey's unorthodox monetary policy

Turalay Kenc

National Institute Global Economic Outlook, 2022, issue 5, 28-31

Abstract: Economic history resoundingly shows that monetary stimulus alone to boost economic growth against the backdrop of low potential growth is a 'divine sin'. The ongoing economic policy in Turkey is a perfect example of such a case. Turkey's recent economic growth policy has led to the initiation of several monetary and credit incentive programmes, resulting in substantial deterioration in its price stability, external balances and asset allocation equilibrium. In the presence of Turkey's significant external imbalances, the increased consumer and producer prices rapidly depreciated the Turkish lira against major foreign currencies: Since mid-2013, the dollar has appreciated against the lira more than 650 per cent. The worsened outlook hit external financing hard, forcing The Central Bank of the Republic of Turkey (CBRT) to sell its foreign currency reserves.

Date: 2022
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