The effect of monetary policy shocks on output in turkey

Determining the impact of monetary policy practices on output is very important for the decisions of policymakers. Therefore, taking into account the effects of the monetary policies applied can be effective for the success of the policy. When we look at the literature on monetary policy shocks, it has an impact on many macro variables as well as on output. These shocks differ from each other according to the speed, severity, direction and period of the economy, which will have effects on macroeconomic variables in terms of contraction and expansion. The aim of this study is to examine the effects of monetary policy shocks applied in Turkey on output. Accordingly, the effects of Turkish monetary policy shocks on output were analyzed using monthly data for the Turkish economy between January 2011 and November 2021. Using weighted average funding cost and industrial production index, Unit root test, cointegration method and causality analysis were applied using weighted average funding cost and industrial production index. As a result of this test, causalities were determined from the positive shock of the weighted average cost of funding to the negative shock of the industrial production index and from the negative shock of the weighted average cost of funding to the positive shock of the industrial production index. In addition, it was found that there was a narrowing monetary policy shock (an increase in interest rates) and an increase in the industrial production index (output level) in the short and long term.