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Impact of Monetary Policy on Economic Instability in Turkey (1983 - 2003)

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  • Mete Feridun
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    Abstract

    This article aims at revealing the effectiveness of Turkish monetary policy in controlling inflation rate and the stability of exchange rate using the rational expectation framework that incorporates the fiscal role of exchange rate. Based on quarterly data covering the period between 1983: Q4 and 2003: Q4, the analysis affirms that the effort of the Turkish monetary policy at influencing the finance of government fiscal deficit through the determination of the inflation-tax rate, to some extent, affects both the rate of inflation and the real exchange rate, thereby causing volatility in their rates. Moderate evidence emerges that inflation affects volatility of its own rate as well as the rate of real exchange.

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    Bibliographic Info

    Article provided by University of Economics, Prague in its journal Prague Economic Papers.

    Volume (Year): 2005 (2005)
    Issue (Month): 2 ()
    Pages: 171-179

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    Handle: RePEc:prg:jnlpep:v:2005:y:2005:i:2:id:261:p:171-179

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    Related research

    Keywords: rational expectations approach; monetary policy; economic instability;

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