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Inflation, Output, and Stabilization in a High Inflation Economy: Turkey, 1980-2000


Author Info

  • Selahattin Dibooglu

    (Southern Illinois Univ. at Carbondale & Univ. of Illinois at Urbana-Champaign)

  • Aykut Kibritcioglu

    (Ankara Univ. & Univ. of Illinois at Urbana-Champaign)


This paper surveys and examines the sources of fluctuations in inflation and output in Turkey. Using a dynamic open economy aggregate supply - aggregate demand model with imperfect capital mobility and structural vector-autoregressions, the authors consider real oil price, supply, balance of payments, real demand, and monetary disturbances. Empirical results indicate that inflation is driven by monetary and real demand disturbances while output is mainly driven by aggregate supply disturbances. The historical decomposition shows that a substantial portion of inflation is aggregate demand-driven core inflation. A credible disinflation program accompanied by structural reform is likely to stabilize the economy with little output costs.

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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0107003.

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Date of creation: 25 Jul 2001
Date of revision: 26 Jul 2001
Handle: RePEc:wpa:wuwpma:0107003

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Keywords: Stabilization Policy - Turkey; Inflation- Causes and Effects; Inflation Theories; Turkey- Macroeconomic Developments; Macroeconomics - Theory of Aggregate Supply and Aggregate Demand; Time Series Models;

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Cited by:
  1. Mariano Roberto S & Gultekin Bulent N & Ozmucur Suleyman & Shabbir Tayyeb & Alper C. Emre, 2004. "Prediction of Currency Crises: Case of Turkey," Review of Middle East Economics and Finance, De Gruyter, vol. 2(2), pages 1-21, August.


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