NEW MONETARY POLICY FRAME AND TOOLS OF THE CENTRAL BANK IN
CONTENTS
Abstract/Özet
Introduction
1. General framework of the monetary policy implementations after
the financial stability target of the CBRT
2. New monetary policy
instruments of the CBRT
2.1. Innovative approach in
the implementation of the interest rate corridor
2.2. Reserve requirement ratios
2.3. Reserve option mechanism (ROM)
Conclusion
References
Abstract
The excessive expansionary
(quantitative easing) monetary policy implemented by developed countries’
central banks in order to overcome 2008 financial crisis has adversely affected
the financial stability of developing economies on a large scale.
This new conjuncture that
emerged after the global crisis has led the said central banks to search for a
new monetary policy. In this context, the Central Bank of the
Here, being mainly a
descriptive and compilation study, the general framework of the monetary policy
implemented by the CBRT after targeting price stability as well as financial
stability are explained. In addition, what kind of monetary policy instruments
developed by the CBRT with the aim of controlling the effects of the
quantitative easing policies in developed countries threatening economy of
Key words: Monetary policy, the Central Bank of the Republic of Turkey (The CBRT: TCMB), interest rate corridor,
reserve requirement ratio (RRR), reserve option mechanism (ROM).
JEL classification code: E52, E58, G21.
TÜRKİYE’DE MERKEZ
BANKASI’NIN
YENİ PARA POLİTİKASI
ÇERÇEVESİ VE ARAÇLARI
Özet
2008 küresel krizinden
çıkabilmek için gelişmiş ülke merkez bankalarının izlediği aşırı parasal
genişleme (niceliksel/miktarsal gevşeme) politikaları, gelişmekte olan
ülkelerin finansal istikrarını önemli ölçüde olumsuz etkilemiştir.
Küresel kriz sonrası ortaya
çıkan bu yeni konjonktür, gelişmekte olan merkez bankalarını yeni para
politikası arayışlarına itmiştir. Bu çerçevede Türkiye Cumhuriyet Merkez
Bankası (TCMB) da 2010 yılının sonlarından itibaren yeni bir para politikası
çerçevesi tasarlayarak uygulamaya koymuştur.
Temelde betimleyici ve
derleme nitelikte olan bu çalışmada, TCMB’nin fiyat istikrarı ile birlikte finansal
istikrarı da hedeflemesi sonrası uyguladığı para politikasının genel çerçevesi
tanıtılmaktadır. Ayrıca gelişmiş ülkelerdeki niceliksel gevşeme
politikalarının, Türkiye ekonomisini tehdit eden etkilerini kontrol etmeye
yönelik olarak TCMB tarafından geliştirilen para politika araçlarının neler
olduğu ve bu araçların hangi amaçla ne yönde kullanıldığı açıklanmaktadır.
Anahtar kelimeler: Para politikası, Türkiye
Cumhuriyet Merkez Bankası (TCMB), faiz koridoru, zorunlu karşılık oranı (ZKO),
rezerv opsiyonu mekanizması (ROM).
JEL sınıflama kodu: E52, E58, G21.
Introduction
The crisis environment in
financial markets which emerged with the mortgage crisis in
As a result of
aiming both price and financial stabilities, the central banks have needed to
use a wide variety of complex monetary policy tools. Therefore, the monetary
authorities of the countries have begun to use unusual (unconventional) monetary
policy instruments, which are inevitably caused by their own internal dynamics.
In this
descriptive and compilation study, firstly, the general framework of the
monetary policy implementations developed by the CBRT after targeting financial
stability as well as price stability will be introduced, then interest rate
corridor and innovative and multi-faceted regulations on required reserves, and
new policy instruments such as Reserve Option Mechanism (ROM) which have been
put into effect since 2010 will be identified.
1. General framework of the monetary policy
implementations after the financial stability target of the CBRT
Before the 2008 global
financial crisis, it was stated by central banks and academia circles that
price stability would be sufficient for financial stability (Issing, 2003:
17-18). However, this idea has been changed following the crisis. The most
fundamental change is to abandon the view that in the case of price stability,
financial stability will be achieved automatically at the same time. The view
that price stability is the only and essential condition to provide, financial
stability has been abandoned by central banks with crisis conditions (Serel,
Özkurt, 2014: 57).
The FED has realised major
changes related to monetary policy after the crisis that began in Lehman
Brothers in August 2007 (Gertler, Karadi, 2011: 17). The CBRT has also started
to work on these evaluations since the end of 2010. The aim of the new policy
instruments that the CBRT is trying to design in parallel with cyclical
developments is to control the current account deficit and volatility of
capital flows besides the financial instruments such as exchange rate, domestic
credit volume, and so on (Başçı, Kara, 2011: 4-8).
High current account deficit
and volatility of capital flows cause the economy to be more fragile. It is
important to limit the current deficit and to balance the external financing in
order to ensure macroeconomic stability and sustainable growth. The severe
recession in economic activities in the crises of 1994, 2001, and 2008 occurred
with a sudden stop in capital flows. This observation points to the need to
increase the resilience of the economy against sudden changes in global risk
appetite in a situation where financing is very short-term and volatile; at the
same time, it emphasises the significance of a more flexible approach to
monetary policy. Thus, the new policy framework adopted by the CBRT needs to be
evaluated mainly within this context (Kara, 2012: 4).
In the implementation of
monetary policy in
The main instruments and
transfer mechanism that the CBRT uses to reach its ultimate goal in monetary
policy, price and financial stabilities, in the new policy framework are shown
in Table 1.
Table
1: Old and New Monetary
Policy Frameworks of the CBRT
|
|
Instruments |
Objectives |
|
Old Framework |
Policy Interest One-week repo rate |
Price stability |
|
New Framework |
Interest rate corridor One-week repo rate Liquidity management Reserve requirements |
Price stability Financial
stability |
Source: TCMB, 2013b: 12.
The first column of the Table
refers to the instruments of monetary policy that have diversified with the new
approach: while in the old approach, one interest rate (one week repo rate),
also called ‘policy interest’, was used in the framework of interest corridor
application; the basic tools of the new policy are (i) more than one interest
rate indicator as a result of a flexible liquidity management policy with (ii)
the Leverage-Based Reserve Requirement which is a different form of application
of reserve requirements and the ROM.
The existence of monetary
policy instruments that are likely to conflict with one another in the context
of achieving price and financial stabilities requires the diversity of
instruments aiming at achieving both goals at the same time. In the period
which financial fragility and instability emerged as a result of global
liquidity abundance and increased risk appetite, with the intensification of
international capital inflows to Turkey, in policies applied to prevent the
issues such as the expansion of the domestic credit volume and the
overvaluation of the TL, the indicators used as intermediate variables were
credit volume and exchange rate (Kara, 2012: 6-7).
In other words, domestic loans
and exchange rate variables refer to the channels of practice in which
instrumental variables are used to achieve monetary policy objectives. As seen
in Table 1, monetary transmission mechanism is aimed to operate through
exchange rate and credit channels: mobility in foreign capital flows is felt at
domestic financial markets mainly through changes in credit volume and
fluctuations in exchange rates (Başçı, Kara, 2011: 4-5).
In developing countries as
Turkey, the credit growth of the banking sector can also accelerate in line
with the demands of firms that are affected positively by the rapid
appreciation of the domestic currency. In this case, on one hand, the
appreciation observed in the domestic currency, on the other hand rapid credit
growth disrupt the effectiveness of the resource allocation in the economy and
can cause macroeconomic instability because the increase it creates in domestic
demand also (together) increases the demand in import. Moreover, the rapid
depreciation of the domestic currency and a sudden contraction process which
may be observed in credit volume can also affects financial stability
negatively. For this reason, the CBRT has developed a new monetary policy
framework since 2010 that also includes financial stability in order to reduce
the adverse effects which may arise from capital flows, to provide loans to
grow at reasonable rates and to prevent the fluctuations in exchange rate from
affecting adversely economic stability (TCMB, 2012a: 3-4).
2.
New monetary policy instruments of the CBRT
The CBRT, instead of using a
short-term single interest rate (policy interest) instrument; a wide (symmetrically
or asymmetrically adjustable) interest rate corridor implementation,
regulations on reserve requirements, and new instruments such as the ROM have
been developed (TCMB, 2012a: 4).
2.1.
Innovative approach in the implementation of the interest rate corridor
Interest rate corridor and
One-week repo rate are among the main elements used in the new monetary policy.
Here, information about them are given.
Interest rate corridor
During the day, the CBRT can
raise funds at overnight lending rates, in the interbank money market against
the collaterals, to the banks which are in liquidity shortage on the condition
that being limited with their sources. Again, the CBRT can borrow overnight at
the borrowing rate on the money market (Eğilmez, 2015: 1).
The overnight lending rate of
the the CBRT is called as 'ceiling (upper bound of the interest rate corridor)'
and borrowing rate is expressed as 'base (lower bound of the interest rate
corridor)'. The interval between these two is named as 'interest rate corridor'.
Overnight market rates are realised in the BIST Repo-Reverse Repo Market,
within the interest rate corridor between the above ceiling and base rates
(Figure 1).
Late Liquidity Window Borrowing Rate Secondary Market Interest Rate Late Liquidity Window Lending Rate Market Maker Banks’ Lending Rate CBRT Policy Interest Rate Weekly Repo Auction Interest Rate CBRT’s
Borrowing Rate CBRT’s
Lending Rate
Figure
1: Operational Framework
of the CBRT Interest Rate Corridor
Hours Interbank + Open Market Operations Late Liquidity Window Facility
Source: TCMB,
2013b: 14.
This wide 'interest rate
corridor' implemented by the CBRT as of 2010 has been different from both its former
policies and those of other central banks. The difference between the base and
ceiling rates has been determined as a wide interval contrary to usual
implementations. However, depending upon the normalisation in the global monetary policies,
the CBRT announced in August 2015 that it would implement a new policy. In this
context, the 'interest rate corridor' would both be narrowed
and be arranged more symmetrically around one-week repo rate. This new policy assessed not as ‘expansion or
contraction’ but ‘simplification’ process. Thus, for example, Monetary Policy
Board launched narrowing interest rate corridor by decreasing overnight
interest rate in the period March-July 2016. The main aims here were to
increase predictibility in the liquidity policy and to provide eficiency in the
implementation of liquidity management by the banks (Tiryaki, 2016: 1).
One-Week
Repo Rate (Policy Rate)
Within the framework of
liquidity management, one of the funding tools of the CBRT is repo auctions
with a one-week maturity. The banks sell their bonds and bills to the CBRT and
receive cash by assigning repurchase (repo) agreements with the CBRT and take
back their papers by paying the required amount at the end of the maturity
period (Eğilmez, 2015: 1). One-week repo auction is carried out by quantity
auction method (TCMB, 2013b: 14).
The liquidity requirement of
the market is met with flexibility within the framework of the CBRT's changing
liquidity management objectives. Although the CBRT meets its liquidity need primarily
through a one-week maturity repo auction, marginal funding over the upper limit
of the interest rate corridor can also be implemented when necessary. In this
situation, depending on the changing liquidity management practices, the
average cost (Weighted Average Interest Rate / Cost) of the TL financing
provided by banks from the CBRT varies. Through one-week repo auctions that
meet a certain part of the liquidity requirement, overnight interest rate can
be realised in the interest rate corridor and at the levels determined by the
Monetary Policy Board (Eğilmez, 2015: 1).
In this system, the interest
rate corridor should be narrowed and expanded in some periods by the CBRT in
order to render the corridor effective as the result of capital movements over
the macroeconomic risks such as exchange rate volatility and loan growth. In
this scope, interest rate corridor can affect macroeconomic variables in
markets via credits and exchange rate channels. Widening the interest rate
corridor upwards and additional tightening with liquidity operations can have
effects on the loans. Banks generally act towards the upper bound of the
corridor while pricing interest risk. Hence, the CBRT, where it is the lender
of last resort, can affect credit growth by raising the upper limit of the
corridor (TCMB, 2013b: 13).
Figure 2 shows the development
of the CBRT’s interest rate corridor and BIST’s overnight interest rates
between 2011-17.
Figure 2: CBRT’s
Interest Rate Corridor and BIST’s Overnight Interest Rates
Overnight Borrowing Interest Rate Corridor CBRT Average Funding Interest Rate (5 day MA*)
Interbank Overnight Repo Interest Rate-End (5 day MA*) One-Week Repo Interest Rate Late Liquidity Window Interest Rate
* MA: Moving Average
Source: TCMB, 2017: 77.
In the Figure 2, the
difference between overnight borrowing and lending rates shows the interest
rate corridor, the one-week repo rate shows the policy rate determined by the CBRT,
the overnight repo interest rate shows the short-term interest rate on the
market, and the average funding rate indicates the weighted average interest
rate of the liquidity borrowed by the CBRT to the markets.
When the interest rate
corridor is widened downwards, the loans lended in the market as well as the
short-term capital movements can also be limited. On the contrary, in the
periods when capital outflows are experienced, global capital flows slow down,
and currency volatility rises upwards, the exchange rate volatility may be
reduced by widening the interest rate corridor upwards (Kara, 2012: 11).
In order to mitigate the
pressure of capital movements on the exchange rate, the CBRT can make funding
less than the market needs when it deems it necessary. Thus, institutions that
provide lower liquidity from the CBRT sell foreign currency (FX) to meet
liquidity deficits. This case limits the effect of the capital outflows on the
exchange rate (TCMB, 2013b: 14).
Unlike the monetary policy
with one instrument, there have been basically two gainings of the interest
rate corridor (Serel, Özkurt, 2014: 61):
a) The possibility of using
credit and exchange rate channels in different directions for price and
financial stability purposes.
b) An implementation
flexibility for the acquisition of the CBRT which can be adjusted on a daily
frequency.
The CBRT can affect; the
short-term interest rates in the secondary market, the exchange rates and the
growth rate of the credits through the interest rates applied to the overnight
transactions constituting the upper bound of the interest rate corridor, and
the interest rates applied to the weekly repo transactions.
The CBRT, interestingly,
gave up the exceptionality of ‘late liquidity window facility’ and determined
it as a ‘rule’ instrument by assuming other instruments as ‘exceptional’
starting from January 2017. As of midst of January 2017, the CBRT has never
lended through one-week
repo auction. Thus, it stopped this method called as ‘policy interest rate’
used before intensively. From that on, ‘new policy interest rate’ of the
CBRT has been the one used for ‘late liquidity window facility’ (Eğilmez, 2017:
1)
2.2.
Reserve requirement ratios
The reserve requirement ratios (RRR) are one of
the most applied tools the CBRT uses to ensure financial stability. The RRRs
represent a certain proportion of the deposits kept by banks that they are
legally obliged to hold at the central banks. The CBRT effectively manages the
reserve requirements in order to reduce the volatility in short-term interest
rates (to increase the effectiveness of the interest rate corridor) and to
affect the credit supply. The RRRs affect loan supply on two channels, namely direct cost and
liquidity channels (Başçı, Kara, 2011: 6).
In the case of increasing the RRR, since the
banks have to hold a larger part of their liquidity in the CBRT, the amount of
liquidity they can use to lend decreases and an increase in resource costs is
observed. The CBRT aims to affect the loan supply of the commercial banks as
well as to reduce the volatility of the short-term interest rates by using the
RRRs. When the Turkish Lira (TL) liquidity decreases in the economy, the CBRT
reduces the RRRs of TL. It may also reduce the RRRs for the FX in order to
increase its liquidity. The RRRs can be increased if the causes that lead to
the problem of TL and FX liquidity are eliminated (Demirhan,
2013: 580).
The reserve requirement implementation is used
both to regulate the amount of loan supply and short-term interest rates of
banks and to reduce the maturity mismatch between banks' assets and
liabilities. As the deposits which have an important place among the resources
of the banks are short-term and the loans are long-term, it causes a maturity
mismatch that may lead to liquidity and interest risks. This results in
financial instability (Eroğlu et al., 2016: 70). In
this context, the RRRs can be kept low in favour of long-term liabilities
(Table 2). The CBRT has increased the RRRs applied in ‘demand, 1 and 3 month
deposits’ in different periods.
Table 2: Reserve Requirement Ratios
(RRR) (%)
|
Turkish Lira
(TRY) |
||
|
Deposits and
Participation Funds (Excluding deposits/participation funds obtained from
banks abroad) |
Ratios |
|
|
- Demand, notice,
up to (and including) 1 and 3-month maturity |
10.5 |
|
|
- Up to (and
including) 6-month maturity |
7.5 |
|
|
- Up to
1-year maturity |
5.5 |
|
|
- 1-year and
longer maturity |
4 |
|
|
Borrower
funds of investment banks |
10.5 |
|
|
|
|
|
|
Other
Liabilities (Including deposits/participation funds obtained from banks
abroad) |
Ratios |
|
|
- Up to
1-year maturity (including 1-year) |
10.5 |
|
|
- Up to
3-year maturity (including 3-year) |
7 |
|
|
- Longer than
3-year maturity |
4 |
|
|
Foreign
Currencies (FX) |
|
||
|
Deposits and
Participation Funds (Excluding deposits/participation funds obtained from
banks abroad) |
|
|
|
|
- Demand,
notice, up to (and including) 1-3-6 month maturities and up to 1-year
maturity |
12 |
|
|
|
- 1-year and
longer than 1-year maturity |
8 |
|
|
|
Borrower
funds of investment banks |
12 |
|
|
|
Other
Liabilities (Including deposits/participation funds obtained from banks
abroad) (**) |
Current Ratios (*) |
New Ratios (*) |
|
|
- Up to (and including)
1-year maturity |
19 |
24 |
|
|
- Up to (and
including) 2-year maturity |
13 |
19 |
|
|
- Up to (and
including) 3-year maturity |
7 |
14 |
|
|
- Up to (and
including) 5-year maturity |
6 |
6 |
|
|
- Longer than
5-year maturity |
5 |
4 |
|
|
|
|
|
|
(*) New RRRs
will be applied to the liabilities after 28 August 2015, as of the maintenance
period dated 23 October 2015. The current ratios will continue to be applied to
stock of liabilities on 28 August 2015 until the end of their original maturities.
(**)
Deposits/participation funds obtained from banks abroad will be subject to the
new ratios for flow liabilities.
Source: http://www.tcmb.gov.tr/wps/wcm/connect/TCMB+EN/TCMB+EN/Main+Menu/MONETARY+POLICY/Reserve+Requirement+Ratios/, (Access date: 05.12.2017).
The CBRT’s reserve requirement liabilities were expanded.
According to this policy, financing companies are also included in the
implementation of the reserve requirement. The main reason of this is that
monitoring of the credit channels out of banking sector is significant for the
financial stability. In this context, financing institutions are obliged to
hold required reserves in the CBRT over the rates currently applicable to the
banks in the framework of their liabilities. One of the new regulations aimed
at ensuring financial stability of the CBRT is the leverage-based reserve
requirement system that seeks to restrict the level the indebtedness of the
banks and put into effect for monitoring purposes in 2013. The leverage ratio
is commonly expressed as the ratio of assets to equity. The high ratio is
considered as a situation that could result in financial crises. This is due to
the fact that high leverage ratios mean that most of the assets in the
financial system are financed by debt, thus financial risks increase (Demirhan, 2013: 581-582).
One of the most important lessons learned from the 2008 global crisis is
that the financial system running with high leverage will lead to economic
disruption in the middle and long periods. For this reason, in order to avoid
the risks that might arise from working with high leverage, leverage-based reserve requirement system has been put into
effect aiming to apply the additional reserve requirement to the bank
which excessively increases the leverage ratio compared to the current
situation (Tuna et al., 2015: 223-224).
2.3. Reserve option mechanism (ROM)
The ROM has given a new perspective to the
implementation of reserve requirements. The ROM is an application that allows
banks to set up a certain percentage of TL reserve requirements in FX and gold.
Since 2012, the CBRT has begun to use the ROM as a policy tool to limit the
effects of excess capital flow volatility on financial stability (TCMB, 2015: 30).
In periods when foreign capital inflows are
accelerated, the costs of resources in FX are lower than those of resources in
TL. In this case, the cost of borrowing of the banks in FX is decreasing. This
encourages banks to benefit more from the ROM (Küçüksaraç,
Özel, 2012: 3). Through this flexibility, on one hand
foreign currencies are prevented from creating a real appreciation in TL and on
the other hand financial stability can be supported by reducing the tendency of
banks to give FX loans. If the ROM mechanism is not available, the need to
sterilise the increased liquidity may arise when the FX entering the country as
a result of capital inflows is bought by the CBRT. The need for sterilisation
is also reduced with the ROM (TCMB, 2012c: 2).
During periods when capital inflows are slow, the cost
of the FX resources is increasing compared to the cost of TL resources. In this
case, the cost of borrowing of the banks in FX is increasing. Banks try to
obtain the currency they need by reducing the ROM usage (Küçüksaraç, Özel, 2012: 3). Thus, the excessive
depreciation of TL is also prevented. As a result, in both cases the ROM plays
a role in balancing the liquidity of FX and the value of TL. Thus, a balance is
provided in FX price without the necessity of the CBRT to sell FX or open sales
auction. In addition, the ROM can reduce the sensitivity of loans to capital
flows (TCMB, 2012c: 3).
Another advantage that the ROM provides to the banking
sector is the short-term TL-Swap transactions: banks can meet their TL
liquidity needs through short-term FX transactions. The ROM reduces the need
for such swaps and reduces the potential adverse effects of short-term capital
flows -by reducing volatility- on financial markets (Serel,
Özkurt, 2014: 65). In order for the ROM to be able to
take place as an automatic balancer on the market and to achieve its intended
objectives, this mechanism must first be used by banks. In Turkey, banks seem
to use this mechanism highly and in a stable manner. (TCMB, 2012d: 61).
Reserve Option
Ratio (ROR) sets the upper bounds to what extent this mechanism can be used.
The coefficients that determine the amount of FX or gold that can be held per
unit of TL required reserve are defined as the Reserve Option Coefficient (ROC)
(TCMB, 2012c:
2). Of the required reserves for TL liabilities; up
to 60 percent in FX, and up to 30 percent in standard gold can be held (http://www.tcmb.gov.tr/wps..., 18.07.2017). Table 3 includes Reserve Option Slices
and Coefficients for FX.
Table 3: Reserve Option Slices and Coefficients for FX
|
FX
Possibility Slices (%) |
Coefficient |
|
0-30 |
1.00 |
|
30-35 |
1.50 |
|
35-40 |
1.90 |
|
40-45 |
2.30 |
|
45-50 |
2.70 |
|
50-55 |
3.10 |
|
55-56 |
3.90 |
|
56-57 |
4.10 |
|
57-58 |
4.30 |
|
58-59 |
4.50 |
|
59-60 |
4.70 |
Source: http://www.tcmb.gov.tr/wps/wcm/connect/TCMB+TR/TCMB+TR/Main+Menu/Para+Politikasi/ZK/, (Access date: 18.07.2017).
As can be seen in the Table 3, the more FX Possibility Slices increases the more
Coefficients for FX raises.
Figure 3: ROM Creation Process
Source: Alper
et al., 2012: 6.
In the Figure 3 formed by Alper et al. (2012: 6), the ROM creation process is shown
in 8 steps. The construction phase of the ROM started in September 2011. At the
beginning, the reserve option ratio was set at 10 percent (I). This rate was
raised to 20 percent in October (II) and to 40 percent in the following month
(III). The differentiation of coefficients in the reserve option has been
started in the middle of 2012. At that time, a 5 percent slice was added to the
reserve option ratio of 40 percent and a ROK of 1.4 was declared for the added
slice (IV). In the following period, the reserve option ratio increased to 55
percent by adding two 5 percent slices (V, VI), which ROK was determined as 1.7
and 1.9 respectively. When the reserve option ratio reached 60 percent, in the
decision that the coefficient was determined as 2 for the last 5 percent slice,
the reserve option coefficient for the first 40 percent slice was also
increased from 1 to 1.1 (VII). In September and October 2012, the coefficients
were increased by 0.2 and 0.1 points.
The ROM provides banks to hold TL required reserves up to a certain ratio besides providing them FX. In Table 4, the golden
opportunity slices and coefficients applied by the CBRT in the last period are
given.
Table 4: Reserve Option Slices and Coefficients for Gold
|
Golden
Opportunity Slices (%) |
Coefficients |
|
0-15 |
1.4 |
|
15-20 |
1.5 |
|
20-25 |
2.0 |
|
25-30 |
2.5 |
Source: http://www.tcmb.gov.tr/wps/wcm/connect/TCMB+TR/TCMB+TR/Main+Menu/Para+Politikasi/ZK/, (Access date: 18.07.2017).
To what extent the banks will benefit from this
mechanism is related to their reaction to foreign capital inflows. Banks, as
mentioned above, can establish TL reserve requirements in the CBRT as FX as
well as gold. A bank that has to hold TL required reserves in the CBRT can hold
up to 30 percent of this amount in gold in the current framework. The banks who
want to benefit wholly, deposit gold against the amount of TL calculated with
1.4 ROK determined for the first 15 percent slice, and for each subsequent 5
percent slice, respectively; standard gold is held in the CBRT against TL
calculated using 2.0 and 2.5 ROK.
In the context of monetary policy implementations, in
general, the CBRT aims to avoid the fluctuations in TL interest rates with the
application of interest rate corridor, and seeks to prevent the destruction
that may occur as a result of rapid entry and exit of capital flows with the
application of the ROM.
Conclusion
The CBRT has designed a new framework of monetary
policy by using different policy instruments complementary to each other in
order to minimise the effects of the global crisis on Turkey (Başçı, Kara, 2011: 1).
In the new framework, it has become possible to
respond to volatility in the global risk appetite on time and ‘fine tunings’
have been achieved by affecting the credit and the exchange rate channels
separately. Through the active use of interest rate corridor, reserve
requirements and other liquidity management instruments, unlike the traditional
monetary policy, it has become possible for the CBRT to influence loans and
exchange rate channels separately.
In the period when rapid credit growth is not desired but
at the same time the strengthening of the TL is not requested, for instance,
the high RRRs and the increasing upward uncertainty about the cost of funding
can permit achieving this goal to a great extent. On the other hand, it is not
possible to give such a separating reaction in the traditional monetary policy
with one interest rate.
As in the traditional inflation targeting, the CBRT
considers inflation to be compatible with the target while taking monetary
policy decisions; however, unlike the past, macro-financial risks such as
excessive growth or slowdown in loans, deviation of exchange rate from economic
bases, current account balance and deterioration of financing are also taken
into consideration. In practice, this is a more flexible inflation targeting
which means that price and financial stabilities are evaluated together (TCMB, 2013a: 22).
It is also important that the applied policy
demonstrates that capital flows can be stabilised without resorting to capital
controls by means of complementary, unconventional monetary policy instruments
designed by the CBRT in country and period-specific manners.
* Assoc. Prof. Dr. Mehmet Behzat Ekinci
Economics,
FEAS, Mardin Artuklu University.
**
Assoc. Prof. Dr. Mehmet Kara
Economics, FEAS, Mustafa Kemal University.
*** “New Monetary Policy Frame and Tools of the Central Bank in Turkey”, International Journal of Social Science Research, 2018, 7(1), 46-61, http://dergipark.gov.tr/download/article-file/502502
*** Acknowledgement: The Authors are thankful to Berna Gündüz, Research Assistant,
FEAS, Kilis 7 Aralık University for her kind contribution.
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