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Monetary policy in high inflation open economies: evidence from Israel and Turkey

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Author Info

  • Sushanta K. Mallick

    (School of Business and Management, Queen Mary, University of London, Mile End Road, London E1 4NS, UK)

  • Mohammed Mohsin

    (Department of Economics, University of Tennessee, 514 Stokely Management Center, Knoxville, TN 37996, USA)

Abstract

With quarterly data from Israel and Turkey we estimate generalized impulse response functions to show that inflation has no long-run real effects on consumption, investment and the current account balance. The findings are robust even after allowing for inflation volatility obtained through GARCH estimates. We develop an inter-temporal optimizing model of a small open economy with a fixed rate of time preference that supports the empirics. Our model, thus, extends the super-neutrality results (� la Sidrausky) in an open economy paradigm. Copyright © 2007 John Wiley & Sons, Ltd.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal International Journal of Finance & Economics.

Volume (Year): 12 (2007)
Issue (Month): 4 ()
Pages: 405-415

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Handle: RePEc:ijf:ijfiec:v:12:y:2007:i:4:p:405-415

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  1. Christopher A. Sims & Tao Zha, 1999. "Error Bands for Impulse Responses," Econometrica, Econometric Society, vol. 67(5), pages 1113-1156, September.
  2. Obstfeld, Maurice, 1981. "Capital Mobility and Devaluation in an Optimizing Model with Rational Expectations," American Economic Review, American Economic Association, vol. 71(2), pages 217-21, May.
  3. Andrew B. Abel, 1985. "Dynamic Behavior of Capital Accumulation in a Cash-in-Advance Model," NBER Working Papers 1549, National Bureau of Economic Research, Inc.
  4. Frederic S. Mishkin, 2000. "Inflation Targeting in Emerging-Market Countries," American Economic Review, American Economic Association, vol. 90(2), pages 105-109, May.
  5. Heaton, John, 1995. "An Empirical Investigation of Asset Pricing with Temporally Dependent Preference Specifications," Econometrica, Econometric Society, vol. 63(3), pages 681-717, May.
  6. Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
  7. Djajic, Slobodan, 1982. "Balance-of-payments dynamics and exchange-rate management," Journal of International Money and Finance, Elsevier, vol. 1(1), pages 179-191, January.
  8. Ferson, Wayne E. & Constantinides, George M., 1991. "Habit persistence and durability in aggregate consumption: Empirical tests," Journal of Financial Economics, Elsevier, vol. 29(2), pages 199-240, October.
  9. Stockman, Alan C., 1981. "Anticipated inflation and the capital stock in a cash in-advance economy," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 387-393.
  10. Calvo, Guillermo A., 1981. "Devaluation: Levels versus rates," Journal of International Economics, Elsevier, vol. 11(2), pages 165-172, May.
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Cited by:
  1. Alexander Zimper, 2014. "The minimal confidence levels of Basel capital regulation," Journal of Banking Regulation, Palgrave Macmillan, vol. 15(2), pages 129-143, April.
  2. Vitor Castro & Ricardo M. Sousa, 2010. "How Do Central Banks React to Wealth Composition and Asset Prices?," GEMF Working Papers 2010-19, GEMF - Faculdade de Economia, Universidade de Coimbra.
  3. Goodness C. Aye & Mehmet Balcilar & Rangan Gupta & Charl Jooste & Stephen M. Miller & Zeynel A. Ozdemir, 2012. "Fiscal Policy Shocks and the Dynamics of Asset Prices: The South African Experience," Working Papers 201228, University of Pretoria, Department of Economics.
  4. Luca Agnello & Vítor Castro & Ricardo M. Sousa, 2011. "How Does Fiscal Policy React to Wealth Composition and Asset Prices?," NIPE Working Papers 24/2011, NIPE - Universidade do Minho.
  5. Guglielmo Maria Caporale & Ricardo M. Sousa, 2011. "Consumption, Wealth, Stock and Housing Returns: Evidence from Emerging Markets," NIPE Working Papers 32/2011, NIPE - Universidade do Minho.
  6. Rangan Gupta & Charl Jooste & Kanyane Matlou, 2013. "A Time-Varying Approach to Analysing Fiscal Policy and Asset Prices in South Africa," Working Papers 201303, University of Pretoria, Department of Economics.
  7. Afonso, António & Sousa, Ricardo M., 2011. "What are the effects of fiscal policy on asset markets?," Economic Modelling, Elsevier, vol. 28(4), pages 1871-1890, July.
  8. Luca Agnello & Ricardo M. Sousa, 2010. "Fiscal Policy and Asset Prices," NIPE Working Papers 25/2010, NIPE - Universidade do Minho.

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