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Determinants of Turkish Inflation

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Author Info

  • Cem Saatcioglu

    (Istanbul University)

  • Levent Korap

    (Marmara University)

Abstract

The main purpose in this paper is to investigate the determinants of inflationary process in Turkish economy. For this purpose, based on some potential causes of inflation, an empirical model is contructed upon emphasizing the roles of various factors on inflationary process. The results obtained support the view of cost-push inflation led by exchange rate depreciations, wage indexation mechanism, real interest structure and public sector pricing behaviour which is considered some part of wholesale prices, rather than the demand-pull monetary factors. Some other factors such as the course of real effective exchange rate have been found indicating a relieving effect on the cost pressure settled in domestic economy as well. Supporting these arguments, we find that the smaller the growth performance of the economy given the cost-pressure through exchange-rate pass-through effects, wage indexation mechanism and the real interest structure be imposed, the larger would be the inflation structure. These all might also be given as evidence to that the cost-push rather than demand-pull factors would affect the course of Turkish business cycles.

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File URL: http://www.tek.org.tr/dosyalar/DETERMINANTS%20OF%20TURKISH%20INFLATION.pdf
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Bibliographic Info

Paper provided by Turkish Economic Association in its series Working Papers with number 2006/7.

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Length: 25 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:tek:wpaper:2006/7

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Related research

Keywords: Inflation; Turkish Economy; Cost-Push Pressure;

References

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  1. Guillermo A. Calvo & Carlos A. Vegh, 1999. "Inflation Stabilization and BOP Crises in Developing Countries," NBER Working Papers 6925, National Bureau of Economic Research, Inc.
  2. Onis, Ziya & Ozmucur, Suleyman, 1990. "Exchange rates, inflation and money supply in Turkey : Testing the vicious circle hypothesis," Journal of Development Economics, Elsevier, vol. 32(1), pages 133-154, January.
  3. Pierre-Richard Agénor & Alexander W. Hoffmaister, 1997. "Money, Wages and Inflation in Middle-Income Developing Countries," IMF Working Papers 97/174, International Monetary Fund.
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Citations

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Cited by:
  1. Levent, Korap, 2007. "Impact of Exchange Rate Changes on Domestic Inflation: he Turkish Experience," MPRA Paper 19589, University Library of Munich, Germany.
  2. Levent, Korap & Özgür, Aslan, 2007. "Exogenous characteristics of short-term capital flows: can they be under control? evidence from Turkey," MPRA Paper 19504, University Library of Munich, Germany.
  3. Levent, Korap, 2007. "Structural VAR identification of the Turkish business cycles," MPRA Paper 21971, University Library of Munich, Germany.
  4. Levent, Korap, 2007. "Modeling purchasing power parity using co-integration: evidence from Turkey," MPRA Paper 19584, University Library of Munich, Germany.
  5. Levent, Korap, 2006. "Seigniorage revenue and Turkish economy," MPRA Paper 20106, University Library of Munich, Germany.

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