Monetary policy transmission in Türkiye under complex external conditions: a multi-method assessment (SVAR-ARDL-LP, 2008–2025)

Abstract This study analyzes the effectiveness of the monetary transmission mechanism in the Turkish economy under complex external conditions and shifting market regimes. Covering the period 2008M10–2025M08, the analysis employs an integrated multi-method framework combining a structural VAR (SVAR) controlled for external shocks, ARDL bounds testing for exchange-rate pass-through, and local projections (LP) to assess regime dependence. The CBRT overnight rate is utilized as the policy instrument, with inflation, bank credit, and the exchange rate serving as primary variables, while global risk factors (VIX, CDS, Brent oil) are incorporated as controls. The findings demonstrate that transmission in Türkiye operates most prominently through the credit channel relative to other pathways, with policy shocks generating a persistent and robust contraction in credit volume. Conversely, the exchange-rate response is immediate but short-lived, while price effects remain weak and delayed. Notably, the study identifies a state-dependent transmission that becomes sharper during post-2018 high-volatility episodes, exhibiting increased sensitivity to external risk premia. Considering these results, the study recommends strengthening the interest-rate-to-deposit pass-through, mitigating external amplification via FX and risk management, and ensuring effective coordination between monetary and macroprudential tools to support price stability.