Construction of the Monetary Conditions Index with TVP-VAR Model: Empirical Evidence for Turkish Economy

Coşkun Akdeniz ()
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Coşkun Akdeniz: Tekirdağ Namık Kemal University

A chapter in Handbook of Research on Emerging Theories, Models, and Applications of Financial Econometrics, 2021, pp 215-228 from Springer

Abstract: Abstract As an important indicator for the central banks that adopting inflation targeting regime, this paper aims to construct a monetary conditions index (MCI) for Turkey based on the weighted sum approach covering the period of 1986:05–2018:10. As a novelty time-varying parameter vector autoregressive (TVP-VAR) models allowing the change of index weights is used over time. The results suggest that the weights of the index components varied substantially over the analysis period and the constructed index is able to capture the crisis periods accurately.

Keywords: Monetary conditions index; TVP-VAR; Turkish economy (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-030-54108-8_9

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DOI: 10.1007/978-3-030-54108-8_9

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