CEU Electronic Theses and Dissertations, 2022
| Author | Eray Şimşek |
|---|---|
| Title | Political Economy of Interest Rates and Exchange Rates in Turkey |
| Summary | In this thesis, I will apply the literature on exchange rate levels to the case of Turkey between 2011 and 2022. Lira has witnessed a major depreciation in the previous decade and became a severely volatile currency. The Central Bank of the Republic of Turkey (CBRT), under heavy pressure from president Recep Tayyip Erdogan, followed an unorthodox monetary policy by cutting the interest rates despite rising inflation and exchange rates. Several experts have pointed out the mistakes in this policy, showing what CBRT is doing wrong, but there has been a gap in the literature on why this policy is being followed by Turkey. Erdoğan’s highly unpopular monetary policy does not comply with the logic of political survival, as defined by Smith and De Mesquita (2003). I will investigate why Erdogan, who has a reasonable likelihood of losing the next elections, insists on this policy despite potential electoral costs. I develop five different hypotheses that might explain why this policy has been stubbornly followed, that might reveal some rational motives of this preference. The thesis reveals that the main aim of AKP governments has been keeping the interest rates low, and that currency depreciation is an undesired consequence of that goal. |
| Supervisor | Fölsz, Attila |
| Department | Political Science MA |
| Full text | https://www.etd.ceu.edu/2022/simsek_eray.pdf |
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