Political Narrative, Erosion of Institutional Trust and Inflation: An Empirical Analysis of Turkey's Great Monetary Policy Experiment
6th The Conference on Current Issues in Business and Economics Studies 2026 Conference, Valencia, İspanya, 25 - 27 Temmuz 2026, ss.1-27, (Tam Metin Bildiri)
- Yayın Türü: Bildiri / Tam Metin Bildiri
- Basıldığı Şehir: Valencia
- Basıldığı Ülke: İspanya
- Sayfa Sayıları: ss.1-27
- İstanbul Üniversitesi Adresli: Evet
Özet
This study examines the long-term effects of Turkey's unconventional monetary policy implemented
between 2010 and 2024 on inflation dynamics through three complementary layers: historical process
analysis, theoretical framing, and econometric modeling. The study's primary contention is that the
inflationary period in Turkey cannot be adequately explained by conventional monetary aggregates alone.
Instead, it is argued that this phenomenon originates from the interplay among doctrinal policy preferences,
eroded institutional trust, and disrupted expectation regimes within a context of political centralization.
Quantitative findings offer substantiation for the exchange rate pass-through hypothesis, with a prevailing
and substantial positive effect of the exchange rate on inflation in both periods. The inflationary role that
central bank advances assumed following the structural break supports the monetary dominance hypothesis,
while the reversal in the sign of the reserve requirement variable concretely illustrates that the transmission
mechanism became dysfunctional during the financial repression period. The negligible or deflationary
effect of the increase in the money supply, however, points to structural vulnerabilities outside standard
monetary channels in a high-dollarization environment. When evaluated collectively, the findings appear
to validate Shiller's narrative economy framework, Barro and Gordon's theory of credibility deficit, and
Dornbusch and Edwards' populist economic cycle model. The study's findings extend beyond the mere
presentation of the Turkish case as a document of national policy failure, revealing that monetary policy
can shift from a technical optimization domain to a governance domain defined by political narratives. This
finding offers broader lessons regarding the importance of institutional credibility, the limits of expectation
management in emerging economies, and the resilience of technocratic policy frameworks in environments
of political contention.