Chapter 1: Determining the Effects of Monetary Policies on Capital Markets of the Emerging Economies: An Evidence from E7 Countries

Monetary policy refers to the actions of the central banks by controlling money supply with the aim of reaching macroeconomic purposes. Controlling inflation, providing stability in interest and currency exchange rate, increasing economic growth and decreasing unemployment rate can be the examples of these purposes (Dinçer, Yuksel, & Adalı, 2018). Within this framework, central banks have some monetary policy instruments for this situation. For instance, they can change interest rates to affect other variables. Additionally, they can purchase or sell foreign exchanges in the market to control the volatility in currency exchange rates. Moreover, they can also purchase or sell government bonds as an open market operation (Yüksel, 2017).