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Term Premium in Turkish Lira Interest Rates

Halil Aydin and Ozgur Ozel

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: In this paper we decompose Turkish government bond yields and currency swap rates into expected short rate and term premium components. We use two well-established approaches and find similar results. Our findings show that the term premium displays countercyclical behavior and it is affected from expected inflation and share of foreign investors in bond market. Compared to survey-based expectations, expected short rate estimates of our model are more responsive to global and domestic market developments. Our estimations carry important information about the stance of monetary policy and investor behavior.

Keywords: Interest rates; Term premium; Yield curve (search for similar items in EconPapers)
JEL-codes: E43 G10 G12 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-ara and nep-mac
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:1933

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