The Interaction between Monetary and Fiscal Policies in Turkey: An Estimated New Keynesian DSGE Model (Yeni Keynesyen Dinamik Stokastik Genel Denge Modeli ï¿½erï¿½evesinde Tï¿½rkiyeï¿½de Para ve Maliye Politikalarinin Etkilesimi )
Cem Çebi ()
Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey
This paper estimates a New Keynesian open economy DSGE model for Turkey by using Bayesian estimation technique for the period of 2002 : q1 - 2009 : q3. It studies fiscal and monetary policy interactions and their role in stabilisation of the economy using a small-scale model following the methodology outlined in Lubik and Schorfheide (2007). The general features of the model can be summarised as follows : Calvo style nominal price rigidities, perfect exchange rate pass-through, complete international asset markets, rule of thumb price setters and distortionary taxation. The parameter estimates show that the monetary authority reacts to inflation but only weakly reacts to the output gap. The degree of interest rate smoothing is high. Fiscal policy has contributed to the debt stabilization but there is no evidence on active fiscal stabilization of output gap.
Keywords: Monetary and Fiscal Policy; Macroeconomic Stabilisation; Bayesian Estimation (search for similar items in EconPapers)
JEL-codes: E52 E61 E63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ara, nep-cba, nep-dge, nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:1104
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