The Differential Sectoral Effects of Policy Shocks: Evidence from Turkey

Abstract

This study is an assessment of the different ways in which various shocks affect the industrial sectors of an economy. Specifically, we examine how production in various industrial sectors are affected by interest rates, as well as exchange rates, money aggregates, aggregated industrial production, and overall price level innovations in the Turkish economy. Our analysis reveals that positive money aggregates and interest rate innovations generate their effects with the expected positive and negative signs, respectively, wherever they are statistically significant. However, the nominal exchange rate has significant effects in more cases than money and interest rates have, most of which are negative. Overall industrial production has significantly positive but short-lived effects on individual sectors, while the positive self-responses of the sectors last for an average of five months. An increase in the general price level has significantly positive effects on sectoral industrial production indices in one-third of the examined cases.

Keywords: Policy Shocks, Sectoral Performance, Emerging Markets

JEL Classification: E23, E32, L60