Managing short-term capital flows in new central banking: unconventional monetary policy framework in Turkey

Ahmet Aysan, Salih Fendoglu () and Mustafa Kilinc

Eurasian Economic Review, 2014, vol. 4, issue 1, 45-69

Abstract: During the global financial crisis of 2008–2009, both advanced and emerging countries have implemented significant easing policies on monetary and fiscal fronts. Yet, the recovery, especially in advanced countries, was not as quick or strong as expected. These quantitative easing policies, coupled with weak recovery and restricted fiscal positions, have created not only abundant but also excessively volatile global liquidity conditions, leading to short-term and excessively volatile capital flows to emerging markets. To contain potential risks due to such flows, emerging countries have augmented their existing policy frameworks. Central Bank of the Republic of Turkey (CBRT), for example, has introduced two new policy tools in its new monetary policy framework: the asymmetric interest rate corridor and the reserve option mechanism (ROM). From a capital flows perspective, the interest rate corridor helps smooth fluctuations in supply of foreign funds, whereas the ROM helps contain movements in demand for foreign funds. Both policies have been actively used by the CBRT and appeared to be effective in containing financial stability risks stemming from excessively volatile capital flows. Copyright Eurasia Business and Economics Society 2014

Keywords: Capital flows; Macroprudential policies; Central banking; E44; E52; E58 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (38)

Downloads: (external link)
http://hdl.handle.net/10.1007/s40822-014-0001-6 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Managing Short-Term Capital Flows in New Central Banking: Unconventional Monetary Policy Framework in Turkey (2014)
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:spr:eurase:v:4:y:2014:i:1:p:45-69

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40822

DOI: 10.1007/s40822-014-0001-6

Access Statistics for this article

Eurasian Economic Review is currently edited by Dorothea Schäfer

More articles in Eurasian Economic Review from Springer, Eurasia Business and Economics Society Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().