Financial stability as a macro prudential monetary policy goal: An application on Turkey

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Thesis Type: Postgraduate

Institution Of The Thesis: Dokuz Eylül University, Sosyal Bilimler Enstitüsü, İktisat Ana Bilim Dalı, Turkey

Approval Date: 2014

Thesis Language: Turkish

Student: OSMAN TÜZÜN

Supervisor: HAKAN KAHYAOĞLU

Open Archive Collection: AVESIS Open Access Collection

Abstract:

2007-2008 financial crisis is an economic event that spreads through the financial markets in the world economy and leads to real economic crisis. This crisis, also called as global financial crisis, has caused remodeling of the monetary policy of countries. The central banks which aim the price stability have added, financial stability to the objective function by diversifying tool functions in the condition of being convenient with this aim. Therefore, the new monetary policy tools have been developed and implemented. Within this new process, the Central Bank of the Republic of Turkey (CBRT) has started to apply new strategy depending on developments in monetary policy. The purpose of this study is to evaluate the domain without compromising the price stability objective to get financial stability applied of macro-prudential monetary policy of Central Bank of the Republic of Turkey. According to the literature, Vector Auto Regressive (VAR) analysis are generally used testing of monetary policies. In this study, Bayesian VAR (B-VAR) analysis which provides possibility of making estimation under the assumption of premise conditions has been used. In order to realize financial stability, policy instruments applied by central bank under the price stability goal has been tested. This study indicates that variables which are accepted as financial stability indicators by CBRT are effected by exogenous shocks. For that reason, it is determined that the policy instruments should be used effectively within the frame of impulse-response mechanism. Keywords: Financial Stability, Macro Prudential Policies, Bayesian VAR.