Transmission Mechanisms of Conventional and Unconventional Monetary Policy: Evidence from the Türkiye Banking Sector

Monetary policy is one of the fundamental macroeconomic tools that has a direct impact on the banking sector and financial stability. Both macroeconomic conditions and bank-specific factors affect a bank's profitability. While traditional monetary policy tools (such as interest rates and reserve requirements) have long been considered fundamental elements shaping banking performance, unconventional tools implemented by central banks after the 2008 global financial crisis (such as liquidity injections, asset purchases, and reverse repos) have begun to play an increasingly critical role in affecting banks' margins and profitability. An assessment was made for Türkiye using monthly data from the period 2011-2025. The analysis was conducted using ARDL long-run coefficients and the short-run ECM. Finally, the Toda-Yamamoto causality relationship and the relationships between variables were discussed. The reveals that the reserve option mechanism and liquidity operations (non-traditional instruments) have a negative impact asset profitability, while reserve requirements and funding costs (traditional instruments) have a positive effect.