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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 H seyin ahin 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
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    More about this item

    Keywords

    Monetary Infl ation; Infl ation Targeting; Kejriwal Perron Cointegration Analysis; Regime Shifts;
    All these keywords.

    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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