IDEAS home Printed from https://ideas.repec.org/a/taf/irapec/v22y2008i2p227-242.html
   My bibliography  Save this article

Macroeconomics of twin-targeting in Turkey: analytics of a financial computable general equilibrium model

Author

Listed:
  • Cagatay Telli
  • Ebru Voyvoda
  • Erinc Yeldan

Abstract

The paper provides an overview of the post-1998 Turkish economy and constructs a macroeconomic computable general equilibrium (CGE) model to illustrate the real and financial sectoral adjustments of the Turkish economy under the conditionalities of the 'twin targets': on primary surplus to gross national product (GNP) ratio and on the inflation rate. We further utilize the model to study three sets of issues: (i) the critical role of the expanded foreign capital inflows in resolving the macroeconomic impasse between the disinflation motives of the central bank and imperatives of debt sustainability and fiscal credibility of the ministry of finance; (ii) reduction of the central bank's interest rates, and (iii) a labor market reform of reducing payroll taxes. Our simulation results suggest that the current monetary strategy, which involves a heavy reliance on foreign capital inflows along with a relatively high real rate of interest, is effective in bringing inflation down; yet it suffers from increased cost of interest burden to the public sector, and strains fiscal credibility. In contrast, given the ex ante constraints of the domestic economy in the short run, an alternative heterodox policy of reduction of the central bank interest rate and lowering of the payroll tax burden in labor markets indicate strong employment and growth effects along with strengthened fiscal credibility.

Suggested Citation

  • Cagatay Telli & Ebru Voyvoda & Erinc Yeldan, 2008. "Macroeconomics of twin-targeting in Turkey: analytics of a financial computable general equilibrium model," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(2), pages 227-242.
  • Handle: RePEc:taf:irapec:v:22:y:2008:i:2:p:227-242
    DOI: 10.1080/02692170701880767
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/02692170701880767
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Çiçek, Deniz & Elgin, Ceyhun, 2011. "Not-quite-great depressions of Turkey: A quantitative analysis of economic growth over 1968–2004," Economic Modelling, Elsevier, vol. 28(6), pages 2691-2700.
    2. Ulas Sener, 2016. "Die relative Autonomie der Zentralbank: Eine politökonomische Analyse der türkischen Geldpolitik nach 2001," Potsdam Economic Studies 05, Universität Potsdam, Wirtschafts- und Sozialwissenschaftliche Fakultät.
    3. Ulas Sener, 2011. "Turkish Monetary Policy in a Post-Crises Era: A Further Case of ‘New Consensus’?," Chapters,in: Credit, Money and Macroeconomic Policy, chapter 14 Edward Elgar Publishing.

    More about this item

    Keywords

    twin-targeting; CGE; inflation; central banks;

    Statistics

    Access and download statistics

    Corrections

    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:taf:irapec:v:22:y:2008:i:2:p:227-242. 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: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/CIRA20 .

    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.