Abstract. The effectiveness of the transmission mechanism of interest rates has been subject of numerous empirical studies. Studies using different methods have reached common findings that the transmission in question does not work very well in Türkiye. In this study, the asymmetric relationship between policy and banking interest rates is investigated using the non-linear ARDL method. The findings indicate that there is an asymmetric interaction between policy and deposit interest rates, and loan interest rates in Türkiye in the long term which raises doubts about the effectiveness of monetary policy and provides insight into the weakness of competition among banks.

Keywords: interest rate, pass-through effect, asymmetry, NARDL, Türkiye.