INTEREST CORRIDOR AS A NEW MONEY POLICY INSTRUMENT: EFFECT OF THE INTEREST DECISIONS OF THE MONETARY POLICY BOARD ON INFLATION IN TURKEY

In this study, interest rate corridor application -aiming at removing the ambiguities seen in the macroeconomic and financial variables and minimizing the effect of capital movements on these variables - is reviewed. the relationship between the interest corridor system - started to be used in turkey effectively from 2010 - and inflation is studied by applying carrion-i silvestre (2009) unit root test with multiple structural breaks and maki (2012) co-integration analysis with multiple structural breaks, by using the monthly data between january 2003 and december 2014. according to the findings obtained, it is concluded that the decisions of the monetary policy board related to central bank of the republic of turkey (cbtr) lending and borrowing interest rates are effective on inflation and they are inflation determinant monetary policy instrument. in error correction model, it was observed that the deviations occurred in the short run between co-moving series in the long run and series converge equilibrium values in the long run, and that such situation establishes proof for reliability of the long term analysis.