Interaction of Monetary and Fiscal Policies in Turkey

Tayyar Buyukbasaran, Cem Cebi and Erdal Yılmaz ()

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

Abstract: This paper aims to investigate the interaction between monetary and fiscal policies in Turkey. For this purpose, a Bayesian Structural Vector Auto-Regression (SVAR) model with sign and zero restrictions is used. We particularly focus on how the fiscal and monetary policy variables respond to various macroeconomic shocks and whether the type of shocks matters. Our results confirm the importance of nature of shocks in terms of interaction between monetary and fiscal policies with the finding that both policy shocks are complementary in response to demand and supply shocks while they are substitute in response to shocks caused by the each other. Our main findings are robust to alternative variable definitions and identifying restrictions.

Keywords: Monetary policy; Fiscal policy; Structural VAR; SVAR; Bayesian VAR; Sign and zero restrictions (search for similar items in EconPapers)
JEL-codes: C11 C32 E52 E62 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-ara, nep-mac, nep-mon and nep-ore
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https://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN ... g+Paperss/2019/19-35 (application/pdf)

Related works:
Journal Article: Interaction of monetary and fiscal policies in Turkey (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:1935

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