Impact of dollarization on the effectiveness of monetary policy in the Republic of Turkiye: 2003:01-2021:06

The effects of dollarization on monetary policy efficiency in Türkiye have been investigated in this study.The investigation focuses on price stability and financial stability which are two primary missions of Central Bank of the Republic of Türkiye.The analysis covers the 2003:01 -2021:06 period.And the econometric estimation method is Nonlinear Autoregressive Distributed Lag approach.Within this scope, positive movements in dollarization significantly disrupt price stability in both the short and long terms.On the other hand, we can say that downward changes in dollarization neither reinforce nor disrupt the price stability in the Turkish economy.The findings show that the effects of dollarization on financial stability are complicated and asymmetric.However, when the results are evaluated in general, it can be said that movements of dollarization in any direction damage financial stability.So, Turkish monetary policymakers should take measures to reduce or at least fix the dollarization for more efficiency in monetary policy.Because the overall results obtained in this study clearly show that increasing dollarization means ineffective monetary policy in the Turkish economy.