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Lead-lag and relationship between money growth and inflation in Turkey: New evidence from a wavelet analysis

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  • Tursoy, Turgut
  • Mar'i, Muhammad

Abstract

The study investigates the relationship between money supply and inflation and Turkey by employing wavelet analysis, mainly continuous wavelet analysis, cross wavelet transforms and wavelet coherence and phase-difference, for the period from 1987 to 2019. Our main finding confirms the modern quantity theory of money about the existence of a relationship between inflation and money supply in the short-run and long-run, and also confirms the traditional quantity theory of money about the existence of a relationship in the long run. The phase difference confirms the existence of a bidirectional relationship between money supply and inflation. The result is consistent with both the traditional quantity theory of money in the long run and the modern quantity theory of money in the short-run and long-run in terms of the existence of a relationship between money supply and inflation.

Suggested Citation

  • Tursoy, Turgut & Mar'i, Muhammad, 2020. "Lead-lag and relationship between money growth and inflation in Turkey: New evidence from a wavelet analysis," MPRA Paper 99595, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:99595
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    References listed on IDEAS

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    Cited by:

    1. Oguzhan Cepni & Yavuz Selim Hacihasanoglu & Muhammed Hasan Yilmaz, 2020. "Credit decomposition and economic activity in Turkey: A wavelet-based approach," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 20(3), pages 109-131.

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    More about this item

    Keywords

    Money supply; inflation; wavelet analysis; Turkey; the quantity theory of money.;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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