Studies on monetary policy based on inflation targeting regime in Turkey: Credibility, financial stability, Taylor rule and Phillips curve relationship

In this Ph.D. dissertation thesis, the monetary policy dynamics of the Central Bank of the Republic of Turkey are examined through comprehensive empirical analysis within the scope of the prominent elements of the monetary policy framework during the inflation targeting regime in Turkey. In all three chapters, estimations are carried out by employing both linear and nonlinear ARDL (NARDL) methods under the assumptions of symmetry and asymmetry. In Chapter 1, in order to investigate the credibility-building behavior of the CBRT, we perform various Taylor-type reaction function estimations augmented with a credibility loss term for the period 2002:01-2021:10. The results reveal that under the strong asymmetry finding, the CBRT has weak credibility-building motivation. In Chapter 2, we estimated some forms of the Taylor-type reaction function for the period of 2002Q1-2021Q2 to examine whether financial stability concerns have an impact on the CBRT's interest rate setting decisions. Empirical findings revealing the existence of asymmetric effects show that the CBRT acts specifically to prevent the appreciation of local currency in the face of real exchange rate developments and does not directly intervene to prevent financial risks in the face of credit developments. Finally, in Chapter 3, an augmented hybrid New Keynesian Phillips curve is estimated to shed light on the inflation dynamics of Turkey in the 2002Q1-2021Q2 period. Findings show that the inflation dynamics of Turkey can be explained through a nonlinear augmented form of the hybrid New Keynesian Phillips curve.