Current Methods and Applications in Econometrics
Interest Rate Pass-Through Mechanism in Turkish Banking Sector; Analysis of the Causality Relationship from Weekly-o/n Repo Rates to Bank Lending Interest RatesEsra Nazmiye Kılcı
Improving policy implications by evaluating the effectiveness of the interest rate transmission mechanism for strengthening monetary policy actions has great importance. The Central Bank of the Republic of Turkey (CBRT) has been maintaining a monetary policy framework focused on price stability, which has been called inflation targeting regime since 2006. In this context, the CBRT has a number of interest rates including weekly repo interest rate, O/N repo interest rate, and late liquidity window interest rate. The objective of this study is to investigate the causality relationship between monetary policy interest rates and bank lending interest rates in the Turkish Banking Sector in the period from 2010:05 through 2018:08. Using monthly O/N-weekly repo rates and bank lending interest rates data from Bloomberg and CBRT, we employ the Fourier KPSS unit root test and Fourier Toda Yamamato causality test in our analysis. The results indicate that both weekly repo rates and O/N interest rates do have impacts on credit interest rates.