IDEAS home Printed from
   My bibliography  Save this article

An open economy new Keynesian macroeconomic model: The case of Turkey


  • Erhan YILDIRIM

    (Çukurova Üniversitesi)

  • Kenan LOPCU

    (Çukurova Üniversitesi)

  • Selim ÇAKMAKLI

    (Çukurova Üniversitesi)


Keynesian Macroeconomic Model emerged at the end of the 1990s. The main characteristics of this consensus are formed by the synthesis of the New Classical, Real Business Cycle and New Keynesian approaches. Although The New Keynesian Macroeconomic Model is based on a general equilibrium model, it can typically be reduced to a three-equation system, consisting of an aggregate supply equation (Phillips curve), an aggregate demand equation (IS equation) and a monetary policy rule. The basic model assumes a closed economy. However, for a small open economy, such as Turkey, whose growth is largely affected by international capital flows, the ability of the standard New Neo-Classical Synthesis model to fully take into account economic dynamics is limited. In this paper, we attempt to extend the New Neo-Classical Synthesis model to a small open economy case by adding equations that would capture the exchange rate movements and the current account dynamics. Results indicate that the open economy New Neo-Classical Synthesis model for Turkey can provide a framework to capture the dynamics of the Turkish economy for the post financial liberalization era and explain the behavior of the Central Bank of the Republic of Turkey.

Suggested Citation

  • Erhan YILDIRIM & Kenan LOPCU & Selim ÇAKMAKLI, 2011. "An open economy new Keynesian macroeconomic model: The case of Turkey," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 26(305), pages 37-56.
  • Handle: RePEc:iif:iifjrn:v:26:y:2011:i:305:p:37-56

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    References listed on IDEAS

    1. Coad, Alex & Rao, Rekha & Tamagni, Federico, 2011. "Growth processes of Italian manufacturing firms," Structural Change and Economic Dynamics, Elsevier, vol. 22(1), pages 54-70, February.
    2. Michael C. Jensen, 2010. "The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 43-58.
    3. Coad, Alex, 2007. "Testing the principle of `growth of the fitter': The relationship between profits and firm growth," Structural Change and Economic Dynamics, Elsevier, vol. 18(3), pages 370-386, September.
    4. Davidsson, Per & Steffens, Paul & Fitzsimmons, Jason, 2009. "Growing profitable or growing from profits: Putting the horse in front of the cart?," Journal of Business Venturing, Elsevier, vol. 24(4), pages 388-406, July.
    5. Geroski, Paul A & Machin, Stephen & Walters, Christopher F, 1997. "Corporate Growth and Profitability," Journal of Industrial Economics, Wiley Blackwell, vol. 45(2), pages 171-189, June.
    6. Noel Capon & John U. Farley & Scott Hoenig, 1990. "Determinants of Financial Performance: A Meta-Analysis," Management Science, INFORMS, vol. 36(10), pages 1143-1159, October.
    7. Katz, Michael L & Shapiro, Carl, 1985. "Network Externalities, Competition, and Compatibility," American Economic Review, American Economic Association, vol. 75(3), pages 424-440, June.
    8. Hambrick, Donald C. & Crozier, Lynn M., 1985. "Stumblers and stars in the management of rapid growth," Journal of Business Venturing, Elsevier, vol. 1(1), pages 31-45.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Open economy; New neo-classical synthesis; Monetary policy;

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • 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


    Access and download statistics


    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:iif:iifjrn:v:26:y:2011:i:305:p:37-56. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ali Bilge). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.