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Inflation Targeting and Inflation Convergence within Turkey

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Yilmazkuday, Hakan

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Abstract

Using a disaggregated level CPI data, this paper compares bilateral convergence properties of Turkish regional inflation rates between pre-inflation-targeting and inflation-targeting periods. Rather than using an ad hoc date for the introduction of inflation-targeting regime, structural break dates are estimated for Turkish national inflation rate as well as the standard deviation of Turkish regional inflation rates. The first moment of Turkish national inflation rate has an estimated break at the beginning of explicit inflation-targeting regime in January 2002, and the second moment of Turkish regional inflation rates has an estimated break at the financial crisis in February 2001 after which Turkey adopted a flexible exchange rate. It is found that during the inflation-targeting period, Turkish regional inflation rates have converged to each other in terms of CPI groups with relatively non-tradable components, and they have diverged from each other in terms of CPI groups with relatively tradable components.

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File URL: http://mpra.ub.uni-muenchen.de/16770/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 16770.

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Date of creation: 2009
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Handle: RePEc:pra:mprapa:16770

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Related research
Keywords: Inflation Targeting; Inflation Rate Convergence; Regional Analysis; Turkey;

Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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