CBRT and monetary policy practices in transition to inflation targeting

In this research, the main framework of monetary policy, advantages and disadvantages of these policies are examined with the concepts of monetary transmission mechanisms, policy tools and targets. However, the monetary policy and strategies in Turkey are also given through a historical period in order to evaluate the transition and change. The effect and success of monetary policy on macro-economic indicators after 2000 are analyzed with the policies which were implemented after global financial crisis in 2008. The mandate of CBRT has changed after the economic crisis of February 2001 and the main objective was defined to maintain price stability. With the support of monetary policies implemented after 2002 the price stability was achieved and the strength of banking sector was increased. Besides, the change of monetary policy until the financial crisis of 2008 was also analyzed. Unconventional monetary policies have gained importance by the financial crisis of 2008. However, due to the problems in the political independence, the policy interest rate could not be used efficiently. This unsuccessful performance depends on the factors such as depreciation of Turkish Lira and missing the inflation targets. There were some periods in success of reaching inflation targets but not generally. The effect of chronic problems of the country such as trade and current account deficits, and the increase of unemployment revealed instability in growth rates. Therefore the main macroeconomic indicators are also shown in this study.