The use of macroprudential policies and unconventional tools after the 2008 crisis: The case of Turkey

The aim of this study is to examine the effectiveness of macro prudential policies and unconventional monetary policy instruments implemented in Turkey in the post-2008 global financial crisis period, with the change of financial stability and the general level of prices. Time series approaches were used as a method in the research; ARDL Bounds Test Approach was applied to test whether the variables were cointegrated or not, and also VAR was applied with Granger Causality and Toda-Yamamoto analyzes to examine the causality relationship between the variables. Long-term coefficients were estimated using DOLS and FMOLS methods. In the study carried out based on "quarterly" data for the period 2009Q1-2022Q1 in Turkey, the policy rate and interest rate corridor representing the unconventional monetary policy; on the other hand, credit/GDP gap, loan collateral ratio, debt-income ratio and leverage ratio were chosen as the variables to represent macro prudential policies. The research process has conducted based on analyzing the effectiveness of unconventional tools on "price stability" and "financial stability", and macro prudential instruments on "financial stability". In the study, BIST financial index, bond interest, currency basket, credit/GDP and CDS premium variables were taken as basis in calculating the financial stability index. Within the scope of the analysis results, the findings obtained in the research are summarized as follows. In terms of the relationship between macroprudential policy instruments and financial stability index, the series related to the variables are cointegrated in the long run, and the short-term error correction coefficient is negative and statistically significant. It is estimated that the credit/GDP gap, which is one of the macroprudential instruments, affects financial stability positively, while the debt-income ratio and leverage ratio variables negatively affect financial stability. The loan-collateral ratio, on the other hand, has no effect on the financial stability index. In terms of the relationship between unconventional monetary policy instruments and financial stability index and CPI, the series related to the variables are cointegrated in the long run, and the short-term error correction term coefficients are negative and statistically significant. Regarding the period studied, it is estimated that the policy rate, which is one of the unconventional monetary policy instruments, affects financial stability negatively and CPI positively. However, it can be noted that DOLS and FMOLS coefficient values are not high. On the other hand, the interest rate corridor variable, which has no effect on the financial stability index, has a limited effect on the CPI.