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Inflation, Output Growth, and Stabilization in Turkey, 1980-2002

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Author Info

  • Sel Dibooglu

    (Southern Illinois University at Carbondale)

  • Aykut Kibritcioglu

    (Ankara University)

Abstract

Using a dynamic aggregate supply and aggregate demand model with imperfect capital mobility and structural VARs, we decompose inflation and output movements into those attributable to terms of trade, supply, balance-of-payments, fiscal, and monetary shocks. Empirical results show that terms of trade shocks have a significant negative effect on inflation in the short run. In the long run, monetary, and balance of payments shocks dominate while budget deficits play a limited role in the inflationary process. Demand shocks have limited effects on output movements; output is mostly driven by terms of trade and supply shocks. The results highlight the importance of a credible disinflation program and structural reform that restrain discretionary aggregate demand policies.

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Bibliographic Info

Paper provided by EconWPA in its series Macroeconomics with number 0306001.

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Length: 33 pages
Date of creation: 04 Jun 2003
Date of revision:
Handle: RePEc:wpa:wuwpma:0306001

Note: Type of Document - Acrobat Reader/PDF; prepared on PC; to print on any printer; pages: 33 ; figures: included
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Web page: http://128.118.178.162

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Keywords: Causes and effects of inflation; inflation theories; stabilization policy; theory of aggregate supply and aggregate demand; time series models; Turkish economy;

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References

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  1. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
  2. Aykut Kibritcioglu & Bengi Kibritcioglu, 2003. "Ham Petrol ve Akaryakit Urunu Fiyat Artislarinin Turkiye'deki Enflasyonist Etkileri (= Inflationary Effects of Increases in Prices of Improted Crude-Oil and Oil-Products in Turkey)," Macroeconomics 0306003, EconWPA.
  3. Erol, Turan & Van Wijnbergen, Sweder, 1997. "Real exchange rate targeting and inflation in Turkey: An empirical analysis with policy credibility," World Development, Elsevier, vol. 25(10), pages 1717-1730, October.
  4. Danny Quah & Shaun Vahey, 1995. "Measuring Core Inflation," Bank of England working papers 31, Bank of England.
  5. Marco Rossi & Daniel Leigh, 2002. "Exchange Rate Pass-Through in Turkey," IMF Working Papers 02/204, International Monetary Fund.
  6. Christopher F. Baum & John T. Barkoulas & Mustafa Caglayan, 1999. "Persistence in International Inflation Rates," Southern Economic Journal, Southern Economic Association, vol. 65(4), pages 900-913, April.
  7. H. Sonmez Atesoglu & Donald Dutkowsky, 1995. "Money, output and prices in Turkey," Applied Economics Letters, Taylor & Francis Journals, vol. 2(2), pages 38-41.
  8. C. Emre Alper & Murat Ucer, 1998. "Some Observations on Turkish Inflation: A ''Random Walk'' Down the Past Decade," Working Papers 1998/02, Bogazici University, Department of Economics.
  9. Pierre-Richard Agénor & Alexander W. Hoffmaister, 1997. "Money, Wages and Inflation in Middle-Income Developing Countries," IMF Working Papers 97/174, International Monetary Fund.
  10. 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.
  11. Metin, Kivilcim, 1995. "An Integrated Analysis of Turkish Inflation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(4), pages 513-31, November.
  12. Gert Wehinger, 2000. "Causes of Inflation in Europe, the United States and Japan: Some Lessons for Maintaining Price Stability in the EMU from a Structural VAR Approach," Empirica, Springer, vol. 27(1), pages 83-107, March.
  13. Laura Papi & G. C. Lim, 1997. "An Econometric Analysis of the Determinants of Inflation in Turkey," IMF Working Papers 97/170, International Monetary Fund.
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Cited by:
  1. Kaya, Huseyin, 2013. "Forecasting the yield curve and the role of macroeconomic information in Turkey," Economic Modelling, Elsevier, vol. 33(C), pages 1-7.
  2. Zeren, Fatma & Korap, Levent, 2010. "A cost-based empirical model of the aggregate price determination for the Turkish economy: a multivariate cointegration approach," MPRA Paper 23655, University Library of Munich, Germany.
  3. C. Emre Alper & Orhan Torul, 2009. "Asymmetric Effects of Oil Prices on the Manufacturing Sector in Turkey," Working Papers 2009/06, Bogazici University, Department of Economics.
  4. Mubariz Hasanov & Aysen Arac & Funda Telatar, 2012. "Nonlinearity and Structural Stability in the Phillips Curve: Evidence from Turkey," Hacettepe University Department of Economics Working Papers 20123, Hacettepe University, Department of Economics.
  5. Kaya, Huseyin, 2013. "The yield curve and the macroeconomy: Evidence from Turkey," Economic Modelling, Elsevier, vol. 32(C), pages 100-107.

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