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Should Central Bank Respond to Exchange Rates: An Estimated DSGE Model for Turkey

Ozge Filiz Yagcibasi and Mustafa Ozan Yıldırım

No 10453, EcoMod2017 from EcoMod

Abstract: Our aim is to examine whether CBRT should respond exchange rate movements. We used a small open economy DSGE model based on Gali(2015). We estimated structural parameters of the model using Bayesian methods over quarterly Turkish data. Our preliminary findings indicate that applying strict inflation targeting is superior to any other alternative interest rate rule. However, a policy maker that values exchange rate stability should also respond to exchange rate fluctuations.

Keywords: Turkey; General equilibrium modeling (CGE); Monetary issues (search for similar items in EconPapers)
Date: 2017-07-04
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