Does monetary policy affect automotive demand? An empirical example from Turkey

Authors : Ayfer Ustabaş, Burak Buyun

Pages : 132-139

View : 44 | Download : 37

Publication Date : 2024-06-30

Article Type : Research Paper

Abstract :The automotive sector makes a significant contribution to economic growth both as an important component of consumer spending and as the main buyer of many supplier sectors. In Turkey, which is one of the countries where this contribution is high, it is thought that the motive of holding wealth and speculation is also effective in the automotive demand of economic agents, especially in recent years. In addition, monetary policy actions to control inflation are also expected to indirectly affect the performance of the automotive sector. There is a substantial literature examining the effects of monetary policy on the automotive demand in industrialized countries. Nevertheless, such studies are quite scarce in emerging countries that are both important automotive producers and have been struggling with high inflation especially in recent years. To fill this gap in the literature, the main objective of this study is to investigate whether monetary policy decisions and domestic automotive demand are related or not in Turkey. The effect of monetary policy on domestic automotive sales in Turkey is tested with the Autoregressive Distributed Lag (ARDL) model. Covering the period of January 2011- December 2023, the study analyzes the weighted average funding cost (WAFC) as a monetary policy variable. The findings of the study suggest that WAFC has a direct effect on domestic automotive sales both in the short run and in the long run. In addition, it was concluded that tight monetary policy reduced automotive sales both in the long run and in the short run. These results support the proposition that monetary policy is an effective tool for policymakers and the real sector to sustain and support the growth of the automotive sector.
Keywords : Para Politikası, AOFM, Otomotiv Sektörü, Faiz Oranı, ARDL Model