Fuzzy Multicriteria Decision Making Methodologies Used in the Book

Using an appropriate methodology is crucial in the analysis. Therefore, the suitable model should be selected according to the type of the evaluation. Otherwise, there is a risk of having inappropriate results. Because of this situation, recommendations can be problematic. In this book, three different analyses are performed. In two of them, fuzzy DEMATEL, fuzzy TOPSIS, and fuzzy VIKOR approaches are taken into consideration. In this chapter, these three methods are explained. In this framework, some studies, which used these methods, are explained.

Analysis Results for the Effectiveness of Monetary Policies With Fuzzy Logic

This chapter aims to examine the effectiveness of central bank policies in E7 economies. For this purpose, five different monetary policy instruments (required reserve ratio, rediscount rate, open market operations, standing facilities, and asset purchase program) are defined as the criteria. On the other side, E7 countries are selected as the alternatives. In the analysis process, fuzzy DEMATEL approach is used to weight the criteria whereas fuzzy TOPSIS and fuzzy VIKOR methods are considered to rank E7 economies. The findings show that open market operations are the most important criterion. However, changing required reserve ratio does not have any powerful impact on the market. Therefore, it is recommended that E7 countries should prefer open market operations instead of required reserve ratio in order to influence the market in an effective manner. Additionally, it is defined that Indonesia has the best performance in the E7 economies while Brazil takes place on the last rank.

Monetary Policy Operations of Central Banks in the E7 Economies

Both monetary and fiscal policies have a crucial role in the financial markets of the countries. In this framework, policies can be used for mainly two different purposes, which are contractionary and expansionary policies. Hence, it can be said that monetary policies play a key role especially for the emerging economies. The main reason is that these are the economies that aim to be a developed economy. In order to reach this objective, they aim to make investment to obtain sustainable economic growth. Similar to this aspect, this chapter aims to identify different monetary policy operations of the central banks. Thus, various monetary policy instruments are explained. After this issue, necessary information is given related to the central banking operations of E7 economies. As a result, it is defined that central banks of these countries play an active role especially during the recession period.

Financial Intermediaries

Effective financial systems provide significant benefits for the sustainable development of the countries. Therefore, most governments aim to take some actions to increase the effectiveness of the financial system. In this framework, financial intermediaries play a crucial role for this purpose. Financial intermediaries can be mainly classified into two different categories: banks and nonbanking organizations. In this chapter, the responsibilities of the financial intermediaries are explained. Within this context, first of all, the different types of the banks are identified. In addition, nonbanking organizations are defined. It is concluded that financial intermediaries should work effectively to increase the performance of the financial system. This situation has a positive influence on the economic growth of the countries.

Understanding the Role of Central Banks in the Financial System

The main responsibility of the central banks is to implement monetary policies. In this framework, they define interest rates and the amount of the money in the financial system. Hence, it can be said that central banks have the critical role in the development of the financial system. Because of this situation, it is obvious that central banks should satisfy some requirements, such as independence, in order to contribute to the effectiveness of the financial systems. Parallel to this aspect, this chapter aims to understand the role of the central banks in the financial system. In this context, the purpose and historical background of the central banking are explained. In addition to this situation, the subject of the central bank independence is identified as well. In the final aspect, important accounts in the analytical balance sheet of the central bank are defined.

Analysis Results for the Independence of the Central Banks With Fuzzy Logic

This chapter aims to measure the independence of the central banks of E7 economies. For this purpose, six different criteria are developed by considering similar studies in the literature. In the analysis process, fuzzy DEMATEL method is used to weight these criteria. On the other hand, both fuzzy TOPSIS and fuzzy VIKOR approaches are taken into consideration to rank E7 economies regarding the central bank independence. The findings show that preventing giving loan to the government is the most important factor while participating rate in the financial market has the weakest importance in the criteria set. It is recommended that central banks in E7 economies should not give loans to the government since this situation has a negative influence on the decisions of local and foreign investors. In addition to this issue, it is also concluded that Indonesia (A4) has the best performance in the E7 economies while Mexico (A5) has the worst performance in the central bank independency among the countries.

Analysis Results for the Effectiveness of Monetary Policies With Cointegration and Causality Analyses

The aim of this chapter is to examine the effectiveness of the monetary policies in E7 economies. For this purpose, two different variables are selected, which are central bank interest rate and inflation rate. These variables are tested with the help of Kao panel cointegration analysis, Pedroni panel cointegration analysis, and Dumitrescu Hurlin panel causality analysis. Additionally, monthly data of these variables for the periods between 1996:01-2019:02 is used in the analysis process. The findings show that there is a long-term relationship between interest rate and inflation rate for E7 economies. This situation gives information that monetary policies are used effectively in these countries. On the other side, for all three different lags, it is concluded that interest is the main cause of the inflation rate. This situation gives information that interest rate decisions of the central banks in E7 economies are very successful to control the inflation rate.

The Mechanism of Financial System

Financial systems bring fund demanders and fund suppliers together. Therefore, with the help of these systems, fund suppliers can earn interest income by using their savings. On the other hand, fund demanders can find money they need so that they can make their investments more easily. Since the investment increase leads to higher GDP, it can be said that effective financial systems make an important contribution to the economic improvement of the countries. Therefore, to provide recommendations to have more effective financial systems, the mechanism of the financial system should be understood appropriately. Hence, in this chapter, firstly, general information about the financial system is given. After that, different fund demanders and suppliers are explained. In the final part, financial instruments are identified.