Unfolding macroprudential mechanisms: central bank-led mechanisms during the post-Global Financial Crisis Turkish experience

Abstract The Global Financial Crisis of 2008 was followed by an increased volatility in capital flows, posing considerable macro-financial risks, especially for emerging markets. Turkey addressed these macro-financial risks between 2010 and 2011. Principal decision makers at the Central Bank of the Republic of Turkey took policy actions by introducing policy mixes that trigger causal mechanisms informing the behaviour of bankers and their customers at the macro level to contain such risks. Utilising insights from causal mechanisms theory, critical realism, and realist evaluation, this article explores how the Central Bank implemented the policy mix. Our central argument is that at the macro level (i.e., structural and institutional contexts), causal mechanisms link actions with micro-level contexts (i.e., perceptions and reasoning of the target audience), whilst at the micro level, multiple causal mechanisms link policy outcomes with actor behaviour through non-linear feedback mechanisms. Our article contributes to the causal mechanisms literature by linking policy mixes and policy outcomes via causal mechanisms that informed agential actions and outcomes containing macro-financial risks.