The Central Bank of Turkey's response to the global currency markets

Previous studies have examined the monetary policy relationship among relatively similar size countries in terms of their economic development. It is also important to explore this relationship between developed countries and developing economies. Moreover, another important question which should be asked is whether the relationship exists among developed and developing economies and what would the size and sign of the coefficient be. Our contributions to existing literature sit on this line. To begin with, we test whether the Taylor rule exists in Turkey or not. First of all, we proved this relationship exists in Turkey. Then, this study concludes that developed countries have a greater impact on developing countries' monetary policies. Moreover, it is found that the effect of the European Central Bank's (ECB) on the monetary policy authority of the European Union related to interest rate over the foreign exchange rate is higher than the impact of the Federal Reserve Bank (FED).