Çatik, A. N. and Martin, C., 2012. Macroeconomic transitions and the transmission mechanism: Evidence from Turkey. Economic Modelling, 29 (4), pp. 1440-1449.
This paper investigates changes to the macroeconomic transmission mechanism in Turkey following a major reform of monetary policy in the early 2000s. We use a Threshold VAR (TVAR) framework to test for and then estimate a model with endogenous transitions between regimes. We detect two regimes, with a clear transition between them in 2003-4. The pre-reform regime is characterized by high inflation, passive monetary policy and persistent responses to shocks. The post-reform regime is characterized by low inflation, active and credible monetary policy and markedly less persistent responses to shocks. Using a model that contains sufficient variables to capture diverse transmission mechanisms, working through the real exchange rate, domestic credit and monetary policy, we find evidence of sharp changes in transmission mechanisms. Post-reform, the response of Turkey to macroeconomic shocks has changed to be similar to those in other modern, market-orientated economies.
|Item Type ||Articles|
|Creators||Çatik, A. N.and Martin, C.|
|Departments||Faculty of Humanities & Social Sciences > Economics|
|Publisher Statement||Martin_Economic-Modelling_2012.pdf: NOTICE: this is the author’s version of a work that was accepted for publication in Economic Modelling. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Economic Modelling, 2012, vol 29, issue 4, DOI 10.1016/j.econmod.2012.02.015|
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