Do Geopolitical Risks Affect Monetary Policies? Evidence From Türkiye with The TVP-VAR Method

This study aims to fill gap in the literature by focusing on the interaction between Türkiye's geopolitical risks and monetary policy. For this purpose, the study examines how the impact of geopolitical risks on economic indicators such as the credit market, money supply, and exchange rates has changed over time, using monthly data from February 2012 to August 2024. The variables included in the model were analyzed using the Time-Varying Parameter Vector Autoregression (TVP-VAR) approach. The findings reveal that credit volume is the main center of interaction within the system. The M1 money supply and the real effective exchange rate, on the other hand, are positioned more as volatility receivers, with limited volatility transmission. Geopolitical risk, however, is largely influenced by its own internal volatility and exerts limited impact on other variables, indicating that the direct effect of geopolitical risk on economic indicators remains limited. Overall, the study results provide valuable insights into the influence of economic policies by examining the links among credit volume, money supply, and exchange rates, while also highlighting the relatively limited impact of geopolitical risk.