Turkey on the measurement of monetary policy stance: Ordered probit approach

This study aims to predict the policy behavior of the Central Bank of the Republic of Turkey(CBRT) after the open inflation target period by deriving a monetary policy stance index for the CBRT. This derived policy stance index also reflects the effect of the CBRT's traditional and non-traditional monetary policy instruments. Thus, it examined whether the policy stance index and the CBRT's policy behavior differ between the periods in which these tools used. The results show that the CBRT's policy behavior changed during these periods. In particular, it exhibited a more cautious policy stance in the traditional period compared to the non-traditional period of the CBRT. In this study, the responses of the CBRT's policy stance to the inflation, output, and exchange rate variables during these periods examined. The findings indicate that the CBRT responded significantly to inflation and exchange rates in the traditional period, while in the non-traditional period it only responded significantly to the exchange rate. Keywords: CBRT, Policy Stance, Traditional Monetary Policy, Non-Traditional Monetary Policy