Tight Monetary Policy Hurts Emerging Economies More Than Loose Policy
Monetary policy actions in Turkey between 1990 and 2014 had different effects based on whether they were tight or loose. Tight monetary policy, with higher interest rates, led to lower exchange rates, output, and prices. Loose monetary policy, with lower interest rates, had the opposite effect but was less impactful than tight policy. Larger policy shocks had a bigger impact, with tight policy being more effective than loose policy.