This paper aims the effectiveness of the monetary transmission mechanism in Turkey in the framework of new monetary policy which is formed after global financial crisis. For this purpose, two Structural VAR (SVAR) models with both Cholesky identification and structural identification covering the period January 2011 to October 2020 are estimated in order to determine the monetary policy transmission mechanism. The findings obtained from the Cholesky identification reveal a price puzzle and exchange rate puzzle as a response of the monetary policy shock. On the other hand, the structural identification, which allows a more realistic definition for a small and open economy, reflects the effect of monetary policy shocks in accordance with the economic theory. The findings show that the monetary transmission mechanism works through interest rate, exchange rate and credit channels in Turkey. It is inferred from the study that the CBRT should attach great importance to the volatility in the exchange rate and credit expansion within the framework of the policy that takes into account financial stability, as well as price stability.
Key words: Monetary Policy, Monetary Transmission Mechanism, Credit, Turkey, Structural VAR. JEL Codes: C30, E52, E58. Article Language: EnglishTurkish
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