The Relationship between Monetary Policy and Asset Prices: Evidence from the Turkish Economy

Abstract The developments in the US housing and real estate sectors played an important role during the Global Financial Crisis of 2008. The findings of previous theoretical and empirical studies have revealed that there was a strong relationship between the expansionary monetary policy that included high liquidity and low-interest rates in the US economy and the housing price bubble, which played a central role in the development of the crisis. These developments have revealed the importance of the relationship between monetary policies and asset prices. In this direction, the present study aims to conduct an empirical investigation of the relationship between monetary policies and asset prices in the Turkish economy. In line with this purpose, the SVAR approach was used in the study. The period included within the scope of the present study was determined as 2011:5-2018:5. According to the findings obtained, it is observed that the only significant reactions of monetary policies to the variables included within the model were to the real effective exchange rate and treasury bill rate. Additionally, the effects of monetary policies on the real effective exchange rate, housing price index, BIST 100 index, treasury bill rate, and interest of government securities were found to be significant