Interaction of monetary and macroprudential policies in Turkey

The financial crisis, which affected the whole world starting from the USA in 2008, showed that the problems experienced on the financial system could have devastating effects on the real economy. The negativities brought about by the global crisis and the global conjuncture after the crisis showed that price stability was not sufficient for macroeconomic stability. In order to maintain macroeconomic stability, macroprudential policies were needed to ensure financial stability, complementing monetary policies targeting price stability. In this study it is aimed to investigate the interaction between monetary and macro-prudential policies in Turkey. In order to investigate the interaction between monetary and macro-prudential policies was estimated by using Structural VAR (SVAR) model. The time series data that used in the study includes quarterly observations from the first quarter of 2010 to the second quarter of 2018. An empirical analysis shows that the effects of monetary and macro prudential policies on the real economy are generally similar. The findings of the study also indicate that macro-prudential policies and monetary policy interactions are two policies that support each other in achieving the objectives of price stability and financial stability.