In the first part of the article, the impacts of monetary policy on inflation are investigated under a situation where the government has to borrow. This investigation depends on the approach of Sargent and Wallace. They argue that tight monetary policy is more inflationary than loose monetary policy in an environment were the government makes borrowings. In the second part of the article, depending on the thesis of Sargent and Wallace, the monetary policy held by TCMB during the period 1989 - 2002 is evaluated. As a result, it is found that TCMB, holding a tight monetary policy, contributed to the rise in inflation during 1989-1997 while, on the contrary, it helped the slowing down of the inflation by holding a relatively loose monetary policy after 1997. Furthermore, it is exhibited that TCMB did not completely have the power to control the rise and fall of the inflation since the process of creation money depended on external entities.