Factors that effect interest rates: The case of Turkey (2002-2018)

Interest rates which are important variant in Turkey's economy is one of the prominent indicators for economic decision making units and economic stability. Changes in interest rates deeply affect the economic situation of a country. Determining the factors affecting interest phenomenon and interest rates is an important factor for economic order.In countries with high interest rates, the most important solution, to minimize or fully resolve the problems is to know what are the factors that cause the interest rates to rise and to choose an effective policy at the same time. The purpose of this study is to analyze the factors affecting the interest rates. Using quarterly data for the period 2002-2018 for Turkey, exchange rate, inflation, government debt stock, london interbank offered rate (libor) and the relationship between money supply and interest rate on government securities will be tested with the help of the Vector Autoregression (VAR) model and the Granger Analysis. In the study, selected variants from the VAR model and Granger Analysis the variables are both influenced self-lags and other variables. According to the findings obtained from the variance decomposition, the most descriptive variable over all variables is their own lags. Key Words : Deposit Interest Rate, Government Debt Stock, Inflation, Vector Autoregression (VAR)