<abstract xmlns="http://www.w3.org/1999/xhtml"><p>In monetary economics literature, there is an agreement that monetary policy has a lagged effect on inflation. As a result of this agreement, monetary policy reaction functions that include expected inflation, instead of current or lagged inflation, are established. On the other hand, there is uncertainty about how much time monetary policy needs to affect inflation. The purpose of this paper is to estimate empirically how far ahead the Central Bank of the Republic of Turkey looks. In other words, the paper examines whether the CBRT takes into consideration 12-month ahead inflation expectations or 24-month ahead inflation expectations while steering interest rates. According to the results of the paper, the CBRT considers 12-month ahead inflation expectations while steering interest rates.</p></abstract>

In monetary economics literature, there is an agreement that monetary policy has a lagged effect on inflation. As a result of this agreement, monetary policy reaction functions that include expected inflation, instead of current or lagged inflation, are established. On the other hand, there is uncertainty about how much time monetary policy needs to affect inflation. The purpose of this paper is to estimate empirically how far ahead the Central Bank of the Republic of Turkey looks. In other words, the paper examines whether the CBRT takes into consideration 12-month ahead inflation expectations or 24-month ahead inflation expectations while steering interest rates. According to the results of the paper, the CBRT considers 12-month ahead inflation expectations while steering interest rates.

How Far Ahead Does the Central Bank of the Republic of Turkey Look?<xref ref-type="fn" rid="fn1_w2aab2b8b7b1b7b1ab1aaAa"><sup>1</sup></xref>

Ahi Evran University, Faculty of Economics and Administrative Sciences, Department of Economics

Journal of Central Banking Theory and Practice

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

How Far Ahead Does the Central Bank of the Republic of Turkey Look?

In monetary economics literature, there is an agreement that monetary policy has a lagged effect on inflation. As a result of this agreement, monetary policy...

How Far Ahead Does the Central Bank of the Republic of Turkey Look?¹

Published Online: Jan 26, 2016

Page range: 99 - 111

DOI: https://doi.org/10.1515/jcbtp-2016-0005

Keywords
The Central Bank of the Republic of Turkey, lags in monetary transmission mechanism, forward-looking reaction function

© 2016 Central Bank of Montenegro

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

How Far Ahead Does the Central Bank of the Republic of Turkey Look?1

Published Online: Jan 26, 2016

Page range: 99 - 111

DOI: https://doi.org/10.1515/jcbtp-2016-0005

KeywordsThe Central Bank of the Republic of Turkey, lags in monetary transmission mechanism, forward-looking reaction function

© 2016 Central Bank of Montenegro

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 3.0 License.

How Far Ahead Does the Central Bank of the Republic of Turkey Look?¹

Keywords
The Central Bank of the Republic of Turkey, lags in monetary transmission mechanism, forward-looking reaction function