Short-term impact on foreign sources of interest rate policy implemented in Turkey after 2001

With the liberalization and development of national capital markets, it has become quite easy for savings owners to invest in foreign securities. In addition, technological developments, increased communication opportunities, the disappearance of the limits in access to information, increased coordination between money and capital markets, such elements have fed this process. Foreign individual and institutional investors increased their investments in other countries, especially in developing countries, in order to benefit from portfolio diversification and high returns, and started to create short term capital movements in these countries in general. Investor's profitability analysis is one of the main factors determining the direction of short-term capital movements. Determining profitable markets before their competitors is among the most important objectives of an investor. Therefore, especially developing countries provide high interest rates to attract the attention of hot money investors. The income of the investor will increase as the interest rate increases in the invested country and will decrease in case of devaluation. In this research, the effect of interest rate policies on short-term liabilities was evaluated. 2005Q4-2019Q01 seasonal period of the data presented by the Central Bank of the Republic of Turkey was compiled from the Electronic Data Dissemination System and the Federal Reserve. Two models were tested within the scope of the research; In the first of these models, the transfer mechanism on the interest rate on short-term deposits on USD and in the second model, the relationship between the said interest and foreign capital volume was analyzed. In this study, ARDL boundary test and VAR effect response functions were used as a method considering unit root test results. According to ARDL limit test, there is a statistically significant and long term relationship between the variables in both models. According to the first model, there is a short-term causality from all variables excluding gross foreign capital to gross domestic product. Similarly, in the second Model, short-term causality from short-term foreign deposit interest to short-term foreign capital was determined. As for the long-term analysis; According to the first model, there is no long-term relationship from inflation and short-term foreign deposit interest rate to gross domestic product. The VAR effect response function shows the same result as the result. In other words, a one-unit shock in short-term deposit interest rates affected the short-term foreign capital ratio positively. According to these analyzes, short-term interest and monetary policy were found to be more effective than the long-term. In other words, economic authorities can control the markets more effectively with short-term monetary policies. Keywords: Interest, short - term foreign capital movements, financial liberalization.