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Is there the time‐inconsistency problem in Turkey?

Author

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  • Hülya Kanalici Akay
  • Mehmet Nargelecekenler

Abstract

Purpose - The purpose of this paper is to analyze the time‐inconsistency problem between inflation and unemployment rate series for Turkey. Design/methodology/approach - The validity of the Barro‐Gordon model's implications is tested by using state‐space form and a Kalman filter. In order to investigate the long‐run effects of the time‐inconsistency problem, unit root and co‐integration tests are applied. First, a Hodrick‐Prescott filter is used to test the short‐run effects. Then the modified Barro‐Gordon model's constraint is applied to the detrended inflation and unemployment rate. Findings - The results of this study suggest that both inflation and unemployment series are not stationary and they include the unit root, but that first differences of the two series are stationary. The co‐integration test results also do not support the Barro‐Gordon model's implications for the long‐run behavior of inflation and unemployment: the two variables are not cointegrated. Originality/value - The results of this study suggest that the time‐inconsistency problem for Turkey can be valid in the short‐run, but sufficient proof cannot be found to support the Barro‐ Gordon model's implications for the long‐run.

Suggested Citation

  • Hülya Kanalici Akay & Mehmet Nargelecekenler, 2007. "Is there the time‐inconsistency problem in Turkey?," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 34(5), pages 389-400, October.
    • Handle: RePEc:eme:jespps:v:34:y:2007:i:5:p:389-400
    DOI: 10.1108/01443580710823202
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    Citations

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    Cited by:

    1. Rizki E. Wimanda & Paul M. Turner & Maximilian J.B. Hall, 2012. "Monetary policy rules for Indonesia: which type is the most efficient?," Journal of Economic Studies, Emerald Group Publishing, vol. 39(4), pages 469-484, December.
    2. Gabriel Caldas Montes, 2014. "Can inflation targeting mitigate monetary policy time-inconsistency?," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 2(2), pages 15-25, April.
    3. Juan Camilo Galvis Ciro, 2018. "La inconsistencia temporal y la inflación: evidencias empíricas para la economía colombiana," Ensayos de Economía 16777, Universidad Nacional de Colombia Sede Medellín.
    4. Helder Ferreira de Mendonça, 2009. "Output‐inflation and unemployment‐inflation trade‐offs under inflation targeting," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 36(1), pages 66-82, January.
    5. George B. Tawadros, 2009. "Testing the impact of inflation targeting on inflation," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 36(4), pages 326-342, September.
    6. Julio Cesar Albuquerque Bastos & Helder Ferreira de Mendonça & Gabriel Montes, 2014. "Time-inconsistency problem: less common than we think," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 41(5), pages 708-720, September.
    7. Rizki E. Wimanda & Paul M. Turner & Maximilian J.B. Hall, 2012. "Monetary policy rules for Indonesia: which type is the most efficient?," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 39(4), pages 469-484, August.
    8. Rasekhi, Saeed & Rastgar, Majid, 2016. "Policy Time-Inconsistency: A Comparison of Managed Floating Exchange Rate and Controlled Exchange Rate Regimes," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 11(4), pages 351-373, October.
    9. Alfredo Marvão Pereira & Oriol Roca‐Sagalés, 2011. "Long‐term effects of fiscal policies in Portugal," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 38(1), pages 114-127, January.

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