The Role of Monetary and Fiscal Policies in Ensuring Financial Stability

Authors : Ayşegül Şahin

Pages : 25-46

Doi:10.17541/optimum.1555924

View : 177 | Download : 146

Publication Date : 2025-01-04

Article Type : Research Paper

Abstract :This study examines the effects of monetary and fiscal policies on financial stability in the Turkish economy for the period 2005Q1-2024Q1. For this purpose, a comprehensive Macro-Financial Stability Index reflecting the changes in the financial stability of the Turkish economy is calculated. Monetary policy interest rate and tax revenue data were used as monetary and fiscal policy variables, respectively. According to the results of the Autoregressive Distributed-Lag (ARDL) model, it is seen that increases in policy interest rates negatively affect financial stability in the short and long term. It is determined that the increase in tax revenues has negative effects on financial stability in the short term and a positive impact in the long term. Sudden and sharp increases in interest rates can disrupt financial stability in the short term. Increasing tax revenues will help sustain public debt and finance public expenditures. Policymakers can maintain financial stability by carefully managing interest rates and tax policies.
Keywords : Finansal istikrar, Para politikası, Maliye politikası