IDEAS home Printed from https://ideas.repec.org/a/bpj/sndecm/v9y2005i1nre1.html

Inflation Dynamics of Turkey: A Structural Estimation

Author

Listed:
  • Yazgan M. Ege

    (Istanbul Bilgi University)

  • Yilmazkuday Hakan

    (Istanbul Bilgi University)

Abstract

Recent empirical research on the New Keynesian Phillips Curve (NKPC) does not offer any supporting evidence for its benchmark version in which all firms are forward-looking. There is, however, empirical support for a modified, "hybrid", NPKC, in which only a proportion of the firms that use a forward-looking rule to set prices.This paper estimates both the benchmark and the hybrid versions of the NKPC using Turkish data. In contrast with the previous applications on developed countries like the U.S. and several Euro area countries, we find empirical support for the benchmark NPKC. This support persists even after controlling for the weak identification problem which has been a serious concern in generalized method of moment estimation. Moreover, the hybrid NKPC is refuted by the data, i.e. the backward-looking behavior is found to be statistically insignificant.

Suggested Citation

  • Yazgan M. Ege & Yilmazkuday Hakan, 2005. "Inflation Dynamics of Turkey: A Structural Estimation," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 9(1), pages 1-15, March.
    • Handle: RePEc:bpj:sndecm:v:9:y:2005:i:1:n:re1
    DOI: 10.2202/1558-3708.1228
    as

    Download full text from publisher

    File URL: https://doi.org/10.2202/1558-3708.1228
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.2202/1558-3708.1228?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Charlotta Groth & Hashmat Khan, 2007. "Investment adjustment costs: evidence from UK and US industries," Bank of England working papers 332, Bank of England.
    2. Frank Kleibergen, 2002. "Pivotal Statistics for Testing Structural Parameters in Instrumental Variables Regression," Econometrica, Econometric Society, vol. 70(5), pages 1781-1803, September.
    3. Steffen Ahrens & Stephen Sacht, 2014. "Estimating a high-frequency New-Keynesian Phillips curve," Empirical Economics, Springer, vol. 46(2), pages 607-628, March.
    4. Hakan Yilmazkuday, 2007. "Inflation targeting supported by managed exchange rate," Applied Economics, Taylor & Francis Journals, vol. 39(16), pages 2011-2026.
    5. Hakan Yilmazkuday, 2013. "Inflation targeting, flexible exchange rates and inflation convergence," Applied Economics, Taylor & Francis Journals, vol. 45(5), pages 593-603, February.
    6. Hakan Yilmazkuday & M. Ege Yazgan, 2009. "Effects of credit and debit cards on the currency demand," Applied Economics, Taylor & Francis Journals, vol. 41(17), pages 2115-2123.
    7. Ramos-Francia, Manuel & Torres, Alberto, 2008. "Inflation dynamics in Mexico: A characterization using the New Phillips curve," The North American Journal of Economics and Finance, Elsevier, vol. 19(3), pages 274-289, December.
    8. Filiz Yesilyurt & J. Elhorst, 2014. "A regional analysis of inflation dynamics in Turkey," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(1), pages 1-17, January.
    9. Hasanov, Mübariz & Araç, Aysen & Telatar, Funda, 2010. "Nonlinearity and structural stability in the Phillips curve: Evidence from Turkey," Economic Modelling, Elsevier, vol. 27(5), pages 1103-1115, September.
    10. Charlotta Groth & Hashmat Khan, 2010. "Investment Adjustment Costs: An Empirical Assessment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(8), pages 1469-1494, December.
    11. Mutiu Gbade Rasaki, 2017. "An Estimated New Keynesian Phillips Curve for Nigeria," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 13(2), pages 203-211, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Giray Gozgor, 2013. "The New Keynesian Phillips Curve in an Inflation Targeting Country: The Case of Turkey," International Journal of Business and Economic Sciences Applied Research (IJBESAR), Democritus University of Thrace (DUTH), Kavala Campus, Greece, vol. 6(1), pages 7-18, April.
    2. Charlotta Groth & Hashmat Khan, 2010. "Investment Adjustment Costs: An Empirical Assessment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(8), pages 1469-1494, December.
    3. Charlotta Groth & Hashmat Khan, 2007. "Investment adjustment costs: evidence from UK and US industries," Bank of England working papers 332, Bank of England.
    4. Ramos-Francia, Manuel & Torres, Alberto, 2008. "Inflation dynamics in Mexico: A characterization using the New Phillips curve," The North American Journal of Economics and Finance, Elsevier, vol. 19(3), pages 274-289, December.
    5. Filiz Yesilyurt & J. Elhorst, 2014. "A regional analysis of inflation dynamics in Turkey," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(1), pages 1-17, January.
    6. Hasanov, Mübariz & Araç, Aysen & Telatar, Funda, 2010. "Nonlinearity and structural stability in the Phillips curve: Evidence from Turkey," Economic Modelling, Elsevier, vol. 27(5), pages 1103-1115, September.
    7. Mutiu Gbade Rasaki, 2017. "An Estimated New Keynesian Phillips Curve for Nigeria," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 13(2), pages 203-211, April.
    8. Yilmazkuday, Hakan, 2009. "Inflation Targeting and Inflation Convergence within Turkey," MPRA Paper 16770, University Library of Munich, Germany.
    9. Steffen Ahrens & Stephen Sacht, 2014. "Estimating a high-frequency New-Keynesian Phillips curve," Empirical Economics, Springer, vol. 46(2), pages 607-628, March.
    10. Gayaker, Savas & Ağaslan, Erkan & Alkan, Buket & Çiçek, Serkan, 2021. "The deterioration in credibility, destabilization of exchange rate and the rise in exchange rate pass-through in Turkey," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 571-587.
    11. Mustafa Kocoglu, 2023. "Drivers of inflation in Turkey: a new Keynesian Phillips curve perspective," Economic Change and Restructuring, Springer, vol. 56(4), pages 2825-2853, August.
    12. Selen Başer Andiç & Hande Küçük & Fethi Öğünç, 2015. "Inflation Dynamics in Turkey: In Pursuit of a Domestic Cost Measure," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(2), pages 418-431, March.
    13. Yılmaz, Ensar & Bulut, Necip, 2025. "Inflation dynamics: Profits, wages and import prices," Economic Systems, Elsevier, vol. 49(3).
    14. Hakan, Yilmazkuday, 2009. "Is there a Role for International Trade Costs in Explaining the Central Bank Behavior?," MPRA Paper 15951, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tarek Kacemi & Sallahuddin Hassan, 2018. "Inflation dynamics analysis in selected MENA countries," Pakistan Journal of Humanities and Social Sciences, International Research Alliance for Sustainable Development (iRASD), vol. 6(2), pages :160-168, June.
    2. Hakan Yilmazkuday, 2007. "Inflation targeting supported by managed exchange rate," Applied Economics, Taylor & Francis Journals, vol. 39(16), pages 2011-2026.
    3. Shih-Tang Hwu, 2025. "Identification and Estimation in Linear Models with Endogeneity Through Time-Varying Volatility," Mathematics, MDPI, vol. 13(11), pages 1-17, June.
    4. Jean-Marie Dufour, 2003. "Identification, weak instruments, and statistical inference in econometrics," Canadian Journal of Economics, Canadian Economics Association, vol. 36(4), pages 767-808, November.
    5. Doko Tchatoka, Firmin Sabro, 2012. "Specification Tests with Weak and Invalid Instruments," MPRA Paper 40185, University Library of Munich, Germany.
    6. Harry Aginta & Masakazu Someya, 2022. "Regional economic structure and heterogeneous effects of monetary policy: evidence from Indonesian provinces," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 11(1), pages 1-25, December.
    7. Bazán-Palomino, Walter & Rodríguez, Gabriel, 2018. "The New Keynesian framework for a small open economy with structural breaks: Empirical evidence from Peru," Structural Change and Economic Dynamics, Elsevier, vol. 46(C), pages 13-25.
    8. Boscá, J.E. & Doménech, R. & Ferri, J. & Méndez, R. & Rubio-Ramírez, J.F., 2020. "Financial and fiscal shocks in the great recession and recovery of the Spanish economy," European Economic Review, Elsevier, vol. 127(C).
    9. Antoine, Bertille & Lavergne, Pascal, 2023. "Identification-robust nonparametric inference in a linear IV model," Journal of Econometrics, Elsevier, vol. 235(1), pages 1-24.
    10. Christian Bredemeier & Falko Juessen & Andreas Schabert, 2015. "Fiscal policy, interest rate spreads,and the zero lower bound," Working Paper Series in Economics 80, University of Cologne, Department of Economics.
    11. Whitney K. Newey & Frank Windmeijer, 2005. "GMM with many weak moment conditions," CeMMAP working papers CWP18/05, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    12. Jun, Sung Jae, 2008. "Weak identification robust tests in an instrumental quantile model," Journal of Econometrics, Elsevier, vol. 144(1), pages 118-138, May.
    13. Bui Trung Thanh, 2024. "Foreign exchange interventions and monetary policy: evidence from emerging economies," Review of Economic Perspectives, Sciendo, vol. 24(2-3), pages 71-89.
    14. Kleibergen, Frank & Zhan, Zhaoguo, 2025. "Risk premia from the cross-section of individual assets," Journal of Econometrics, Elsevier, vol. 252(PA).
    15. Frank Kleibergen, 2004. "Expansions of GMM statistics that indicate their properties under weak and/or many instruments and the bootstrap," Econometric Society 2004 North American Summer Meetings 408, Econometric Society.
    16. Melina, Giovanni & Villa, Stefania, 2023. "Drivers of large recessions and monetary policy responses," Journal of International Money and Finance, Elsevier, vol. 137(C).
    17. Hamed Ghiaie & Jean‐François Rouillard, 2022. "Housing tax expenditures and financial intermediation," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(2), pages 937-970, May.
    18. Yukun Ma, 2023. "Identification-robust inference for the LATE with high-dimensional covariates," Papers 2302.09756, arXiv.org, revised Nov 2025.
    19. Burhan Can Karahasan, 2014. "The Spatial Distribution Of New Firms:Can Peripheral Areas Escape From The Curse Of Remoteness?," Romanian Journal of Regional Science, Romanian Regional Science Association, vol. 8(2), pages 1-28, DECEMBER.
    20. Caner, Mehmet & Yıldız, Neşe, 2012. "CUE with many weak instruments and nearly singular design," Journal of Econometrics, Elsevier, vol. 170(2), pages 422-441.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:sndecm:v:9:y:2005:i:1:n:re1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyterbrill.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.