The credit channel of monetary transmission mechanism: Turkey case

In this study, the credit channel of monetary transmission mechanism is evaluated within the framework of the new keynesian and post keynesian approach and the existence of credit channel in Turkey is tested with VAR model between the years 2002-2008 using monthly data. This study consists of five sections. In the first section of the study the importance of monetary transmission mechanism and the historical issues about monetary transmission have been mentioned. In the second section the credit channel of monetary transmission is evaluated within the new keynesian framework and empirical studies about credit channel is mentioned. In the third section, post keynesian approach which is an alternative view about credit view has been revealed. Hereafter new keynesian and post keynesian approaches is compared. In the fourth section, the banking sector in the Turkish financial system is evaluated within the framework of basic statistical indicators. In the fifth chapter, a VAR model has been established to investigate the monetary policy in Turkey is transmissed through the real economy by credits, using domestic volume of total loans, total deposits, total securities, industrial production index and interbank overnight interest rate monthly time series covering the period 2002-2008. According to the results of VAR model strong evidence about the transmission of monetary shocks to the real production by loans is not achieved while the transmission of monetary shocks to the credit channel is being existed. Furthermore the results of VAR model supports the post keynesian credit money argument.