In this paper, we attempt to estimate reaction functions of the Central Bank of the Republic of Turkey (CBRT) based on Taylor rule and Hybrid McCallum-Taylor rule. We apply Generalized Methods of Moments (GMM) and Limited Information Maximum Likelihood (LIML) methods for estimating monetary policy reaction functions, over the period when the CBRT has conducted inflation targeting by using nominal interest rate as a monetary policy tool in free floating exchange rate regime. Our efficient and robust empirical findings show that only Taylor rule specifications are able to explain the behaviour of the CBRT. | Inflation targeting and monetary policy rules: Further evidence from the case of Turkey
