Neo-Fisher Effect and Implementation of Turkey

After the financial crisis in 2007-2009, most of the central banks applied low interest rate policy. However, inflation continued to fall below the targeted levels, especially in developed countries, along with the low interest rate policy. After the financial crisis, the causality relationship between inflation and nominal interest rates was revisited. In contrast to the causality in the Fisher effect, it is seen that in parallel with the Neo-Fisherian views, there is causality from the nominal interest rate to the inflation rate in the short term. In this study in Turkey 2002:01-2014:05 period the causality relationship between BAFO, A1FO, A3FO, A6FO, Y1FO and TUFE variables was examined by Toda-Yamamoto (1995) analysis. According to the results of the analysis, it was determined that the one-way causality from the BAFO variable to the TUFE variable. Thus causality of the variables in the corresponding period in Turkey indicate the presence of Neo-Fisher effect. However, the existence of a disciplined financial environment is essential for the Neo-Fisher effect to be used in countries. However, the presence of a disciplined financial environment is necessary so that Neo-Fisher-induced causality can be used to control inflation. In countries with high external dependency, stabilization in political and economic areas and credibility of the central bank are required