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Impact of Monetary Policy on Economic Instability in Turkey (1983 - 2003)

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  • Mete Feridun

Abstract

This article aims at revealing the effectiveness of Turkish monetary policy in controlling inflation rate and the stability of exchange rate using the rational expectation framework that incorporates the fiscal role of exchange rate. Based on quarterly data covering the period between 1983: Q4 and 2003: Q4, the analysis affirms that the effort of the Turkish monetary policy at influencing the finance of government fiscal deficit through the determination of the inflation-tax rate, to some extent, affects both the rate of inflation and the real exchange rate, thereby causing volatility in their rates. Moderate evidence emerges that inflation affects volatility of its own rate as well as the rate of real exchange.

Suggested Citation

  • Mete Feridun, 2005. "Impact of Monetary Policy on Economic Instability in Turkey (1983 - 2003)," Prague Economic Papers, University of Economics, Prague, vol. 2005(2), pages 171-179.
  • Handle: RePEc:prg:jnlpep:v:2005:y:2005:i:2:id:261:p:171-179
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    References listed on IDEAS

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    More about this item

    Keywords

    monetary policy; rational expectations approach; economic instability;

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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