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Price-Money Relationship after Infl ation Targeting: Co-integration Test with Structural Breaks for Turkey and Brazil

Author

Listed:
  • Cuneyt Dumrul

    (Department of Economics, Erciyes University, Faculty of Economics and Administrative Sciences, Kayseri, Turkey,)

  • Yasemin Dumrul

    (Erciyes University, Develi Hüseyin Þahin Vocational College, Kayseri, Turkey.)

Abstract

The infl ation targeting (IT) strategy may create structural changes in macroeconomic variables. This study analyzes the effect of the IT strategy on the price-money supply relationship in Turkey and Brazil by Kejriwal–Perron (K–P) cointegration analysis with structural breaks. The analysis aims to determine whether the IT strategy leads to regime shifts in the price index-money supply relationship in Turkey and Brazil. The K–P tests reveal a structural break in the price-money supply relationship as a result of the IT strategy. In both countries, the implementation of this strategy leads to a decrease in the regime coeffi cients for Turkey while it creates an increase for Brazil. When Turkey and Brazil are compared in terms of money-price relationship after the IT strategy, the study reveals that it has weakened more in Brazil.

Suggested Citation

  • Cuneyt Dumrul & Yasemin Dumrul, 2015. "Price-Money Relationship after Infl ation Targeting: Co-integration Test with Structural Breaks for Turkey and Brazil," International Journal of Economics and Financial Issues, Econjournals, vol. 5(3), pages 701-708.
  • Handle: RePEc:eco:journ1:2015-03-09
    as

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    References listed on IDEAS

    as
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    3. Patrick A. Imam & Kangni R Kpodar, 2010. "Islamic Banking; How Has it Diffused?," IMF Working Papers 10/195, International Monetary Fund.
    4. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    5. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
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    7. Ebrahim, Muhammed-Shahid & Safadi, Akram, 1995. "Behavioral norms in the Islamic doctrine of economics: A comment," Journal of Economic Behavior & Organization, Elsevier, vol. 27(1), pages 151-157, June.
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    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Monetary Infl ation; Infl ation Targeting; Kejriwal–Perron Cointegration Analysis; Regime Shifts;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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