The Effects of Credibility on Interest Rates in Turkey


  • M. Kadir DOĞAN Ankara University
  • Gülcan BOZDEMİR Republic of Turkey Ministry of Economy


Credibility, Central Banking, Inflation Targeting, Inflation Expectations, Dynamic Inconsistency


Credibility is crucial for managing inflation expectations in countries adopting inflation targeting. This study focuses on measurement of credibility and its relation with the interest rates. It aims to determine which measures of credibility best predict the variations of interest rates by using monthly data from Turkey in 2004?2012 period which adopted infla#on targe#ng in 2002. Nine credibility indices are considered in the analysis. We find empirical evidence supporting the claim that higher credibility will lead to lower variations in interest rates of both monetary policy and the market. We also demonstrated that CICK (proposed by Cecchetti and Krause, 2002) is the best credibility index in explaining the variations in both monetary policy interest rate and market interest rate.



How to Cite

DOĞAN, M. K., & BOZDEMİR, G. (2014). The Effects of Credibility on Interest Rates in Turkey. Eurasian Journal of Business and Economics, 7(14), 71-90. Retrieved from