The aim of this paper is to examine the dynamic relationship between house prices, income, interest rates, housing permits, and share prices in Turkey, using Structural Vector Autoregressive (SVAR) models. This paper uses both monthly and quarterly data for the Turkish economy and applies four different SVAR models to reveal this dynamic relationship over the 2003-2016 period. The results show statistically significant and substantial relationships between the variables. The analysis also shows that house prices and housing permits as housing market variables are very sensitive to monetary policy and income shocks. The key finding of the study for policymakers is that a change in mortgage rates is the factor that most changes house prices. The study also shows that the housing market plays an important role in transferring monetary policy to the real economy in Turkey.

This article investigates the time series properties of per capita real output for 19 Latin American Countries over the period 1965 to 2004. This empirical study examines the significance of contemporaneous correlations among cross sectional residuals using two newly developed tests. The tests find evidence of cross sectional dependence and induce us to use the SURADF and the CADF panel unit root tests, which allow for cross sectional dependence. The tests indicate that the real output in Latin American countries are characterized by a difference stationary process and output fluctuations seem to be permanent. These findings have important policy implications for these countries.

Purpose Recent turbulence in global financial markets implies that emerging economies are likely to soon enter a new era with greater pressure for currency depreciation and capital outflows. This will likely bring challenges, including macroeconomic instability and inflationary pressures due to potential rapid depreciation. In this context, certain key questions about emerging economies have become focal points of discussion in political and academic spheres: what are the effects of exchange rate depreciation on economic activity? Does exchange rate depreciation create inflationary pressure? Finding answers to these questions is critical for policymakers and financial market participants. As such, the purpose of this paper is to shed light on these questions and thus provides guidance on mitigating the negative impacts of shocks in four fast-growing emerging economies. Design/methodology/approach The authors use a vector autoregression model with sign restrictions to examine the dynamic effects of exchange rate movements on fundamental macroeconomic indicators for four fast-growing countries, namely, Brazil, Turkey, Russia, and South Africa. Following Berument et al. (2012a), Ncube and Ndou (2013), Bjørnland and Halvorsen (2013), and An et al. (2014), the authors adopt the sign restriction methodology to identify exchange rate shocks alongside other macroeconomic shocks (monetary policy and productivity shocks) leading to exchange rate fluctuations. Findings The results show that exchange rate depreciation typically generates a deep recession and high inflation while improving the trade balance in the four emerging economies. This indicates that depreciation has strong “stagflationary” effects, which are transmitted to the macroeconomy primarily via supply-side channels, especially through the cost of import. Furthermore, the authors find that monetary policy reacts immediately to a domestic currency depreciation in all four emerging countries. Practical implications The results imply that these countries’ monetary policies are not and cannot be neutral to exchange rate shocks. However, in these import-dependent countries, monetary tightening (i.e. rate hikes in response to an exchange rate shock) plays a limited role in mitigating the negative effects of depreciation on inflation and economic activity due to the presence of a dominant supply-side channel. In this framework, policymakers should pay greater attention to structural reforms that aim to reduce import dependency. These reforms may increase the effectiveness of domestic monetary policy in mitigating the negative effects of external shocks. Originality/value This paper provides a useful perspective for policymakers designing economic interventions to mitigate the adverse effects of exchange rate depreciation and to those who borrow or lend in domestic or international financial markets.

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