Title: The impacts of monetary policy responses to COVID-19 pandemic on national currencies: an emerging country case

Authors: Özer Depren; Mustafa Tevfik Kartal; Serpil Kılıç Depren

Addresses: Customer Experience Researches Directorate, Yapı Kredi Bank, İstanbul, Turkey ' Financial Reporting and Subsidiaries Directorate, Borsa İstanbul, İstanbul, Turkey ' Department of Statistics, Yildiz Technical University, İstanbul, Turkey

Abstract: The study investigates the effects of monetary policy responses on the value of Turkish lira (TRY) against the US dollar (USD) with considering the effect of the pandemic since TRY has depreciated at an important amount recently. In this context, daily data from 21 October 2019 to 30 October 2020 are examined by using a total of four monetary policy indicators, and national and global variables. In addition, artificial neural network analysis is performed. The results reveal that: 1) the importance of the independent factors are differentiated in each period; 2) the weighted average cost of funding, the amount of securities bought by the CBRT, and the amount of emission, which are all monetary policy indicators, are the most influencing factors affecting the value of TRY in the pre-pandemic period, the loose monetary policy period, and the gradual normalisation period, respectively; 3) monetary policy responses have a strong effect on the value of TRY. Therefore, Turkey should recast the monetary policy responses to preserve the value of TRY in light of the results and recommendations presented in the study.

Keywords: COVID-19 pandemic; monetary policy responses; TRY/USD; artificial neural network.

DOI: 10.1504/IJEPEE.2023.129777

International Journal of Economic Policy in Emerging Economies, 2023 Vol.17 No.2, pp.183 - 195

Received: 23 Nov 2020
Accepted: 04 Mar 2021

Published online: 27 Mar 2023 *

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