Monetary Policy Analysis for Turkey in a Game Theoretical Perspective

The main goal of monetary authority is to create a stable output and price level in the economy. Policies to be used depend upon the relative weights of above goals for the monetary authority. Also, the expectations of other economic institutions are important for policy determination. Within this context, this research investigates various policies that the monetary authority should follow depending on the expectations of economic institutions in the country. In order to do that, we constructed a game theoretical model and showed which policy results in Nash equilibrium. The last point discussed in the research is the policy applications of the Central Bank of Turkey from 1990 to 2003.