Monetary policy is one of the instruments that policymakers use to provide both sustainable economic growth and price stability. In this study, I analyse the stock market transmission channel of the monetary policy of the Turkish economy not only at the aggregate but also at the sectoral level in a structural vector autoregression (SVAR) framework. I adopt alternative variables as a policy instrument. When the spread is used as a policy instrument, I find that contractionary monetary policy has a significant negative effect on both output and the price level, and it appreciates the Turkish Lira. Besides, the tight monetary policy reduces both aggregate and sectoral market returns. Hence, I observe that there are effective interest rate, exchange rate, and asset price channels in the Turkish economy.

In the study, it is aimed to analyse both the impacts of the real exchange rate in Turkey on the balance of foreign trade and the dependency of export to import in the segregation of intermediate goods, consumer goods, and raw material for 2003-2015 term. Accordingly, the relationships between variables are investigated through the Johansen cointegration approach, the vector error correction model, and the Granger causality test. The findings show that real exchange rate influences, in the long run, the import and export of intermediate goods, the import and export of consumer goods, and the aggregate export and import.

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