Finance and Accounting Essay: the effects of interest rate volatilities on the demand of Turkish money

Finance and Accounting Essay: the effects of interest rate volatilities on the demand of Turkish money Essay example
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Finance & Accounting
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Econometrics Assignment Abstract: The aim of this study is to examine the effects of interest rate volatilities on the demand of Turkish money. The Turkish money is Lira. The period that has been taken for analysis is 1990 – 2000. Interest rates are predicted on time deposits and treasury bills…

Introduction

This theory of the effect of interest rate volatility on Turkish money demand can be established only through the Garch model. This theory needs to be established using the E-view software by using the Garch model. Introduction: The main aim of this study is to understand the effect of interest rate volatility on the Turkish money demand. Interest rate volatility is a very important factor in determining a healthy monetary policy for the economy. It is important to identify the factors that create the demand for money. The period of 1990s saw the banking sector in Turkey highly dominated by public banks, which were inefficient in its activities. The Turkish bank sector had a large number of serious discrepancies and deficiencies such as large risks in foreign currency, interest rates and liquidity in the banking sector. During the decided investigation period of 1990-2000s, the increase in GDP was only 2.5 per cent in Turkey. The banking sector in Turkey was deficient of good governance and the economic environment in which the banks existed brought severe economic losses to the bank. “The credits-to-total assets ratio declined from 47 percent to 32.8 percent between 1990 and 2000” (Policy Research Working Paper 2011). There was also a decrease of around 50 – 80% in the credits to deposit ratio in the Turkish banks. ...
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