Original scientific paper
https://doi.org/10.1080/1331677X.2018.1481445
Asymmetries in monetary policy reaction function and the role of uncertainties: the case of Turkey
Pelin Öge Güney
orcid.org/0000-0002-2093-9133
; Department of Economics, Hacettepe University, Ankara, Turkey
Abstract
We analyse the effects of inflation and growth uncertainty on the
monetary policy reaction function of the Central Bank Republic of
Turkey (C.B.R.T.), considering possible asymmetries in the reaction
function over the business cycle. We follow Bec, Salem, and Collard’s
approach in order to specify an asymmetric reaction function
suggesting that central banker interventions are influenced by
business cycles. Our results reveal that the C.B.R.T. has asymmetric
preferences. We find that the C.B.R.T. targets inflation stabilisation,
both in recession and expansion periods. Moreover, the C.B.R.T. reacts
more aggressively to any inflation gap during recessions than it does
during expansions. On the other hand, the C.B.R.T. tries to smooth
fluctuations in output, both during recessions and expansions.
We further discover that the C.B.R.T. reacts to inflation and growth
uncertainties more aggressively in expansion periods.
Keywords
Monetary policy; reaction function; uncertainty; asymmetry; business cycle
Hrčak ID:
206111
URI
Publication date:
3.12.2018.
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