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Turkish Experience With Implicit Inflation Targeting

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  • A. Hakan Kara

Abstract

This paper describes the challenges faced during the implementation of implicit inflation targeting in Turkey and evaluates the transition process to full-fledged inflation targeting. Using this background, the paper draws lessons for similar countries considering inflation targeting as a monetary policy regime. We argue that, the strategy of starting inflation targeting with an "implicit" version and gradually converging to full-fledged targeting can be a viable option when certain set of conditions is not satisfied. We conjecture, however, that implementing a "light" version?namely implicit inflation targeting?does not necessarily mean that the system would be exempt from all the prerequisites. In the Turkish case, for example, institutional independence and political support seem to have been the fundamental conditions for initiating the process of inflation targeting.

Suggested Citation

  • A. Hakan Kara, 2008. "Turkish Experience With Implicit Inflation Targeting," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 8(1), pages 1-16.
  • Handle: RePEc:tcb:cebare:v:8:y:2008:i:1:p:1-16
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    File URL: http://www.tcmb.gov.tr/wps/wcm/connect/EN/TCMB+EN/Main+Menu/Publications/Central+Bank+Review/2008/Volume+8-1/
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    References listed on IDEAS

    as
    1. Olivier Blanchard, 2004. "Fiscal Dominance and Inflation Targeting: Lessons from Brazil," NBER Working Papers 10389, National Bureau of Economic Research, Inc.
    2. Olcay Yucel Emir & Fatih Ozatay & Gulbin Sahinbeyoglu, 2005. "Effects of US Interest Rates and News on the Daily Interest Rates of a Highly Indebted Emerging Country : Evidence from Turkey," Working Papers 0508, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    3. Zelal Aktas & Neslihan Kaya & Umit Ozlale, 2005. "The Price Puzzle in Emerging Markets : Evidence from the Turkish Economy Using Model Based Risk Premium Derived from Domestic Fundamentals," Working Papers 0502, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    4. Carmen M. Reinhart & Kenneth S. Rogoff & Miguel A. Savastano, 2014. "Addicted to Dollars," Annals of Economics and Finance, Society for AEF, vol. 15(1), pages 1-50, May.
    5. Fatih Ozatay, 2005. "Monetary Policy Challenges for Turkey in European Union Accession Process," Working Papers 0511, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    6. Oya Celasun & R. Gaston Gelos & Alessandro Prati, 2004. "Obstacles to disinflation: what is the role of fiscal expectations?," Economic Policy, CEPR;CES;MSH, pages 441-481.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Implicit inflation targeting; Price stability; Turkey;

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • 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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