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Would “Cold Turkey” Work in Turkey?

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  • CELASUN Oya
  • GELOS Gaston
  • PRATI Alessandro

Abstract

When inflation rates in a country are persistently high, observers often believe that the inflation process has become "inertial," posing an obstacle to disinflation. Using an innovative approach, we assess the empirical validity of this argument for the case of Turkey. We find that the current degree of inflation persistence in Turkey is lower than in Brazil and Uruguay prior to their successful stabilization programs. More significantly, expectations of future inflation are more important than past inflation in shaping the inflation process, providing little evidence of "backward-looking" behavior. Using survey data, we find that inflation expectations, in turn, largely depend on the evolution of fiscal variables.
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Suggested Citation

  • CELASUN Oya & GELOS Gaston & PRATI Alessandro, "undated". "Would “Cold Turkey” Work in Turkey?," EcoMod2003 330700033, EcoMod.
  • Handle: RePEc:ekd:003307:330700033
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Oya Pinar Ardic, 2006. "Output, the Real Exchange Rate and the Crises in Turkey," Working Papers 2006/03, Bogazici University, Department of Economics.
    2. Gökhan Çapog¬Lu, 2004. "Anatomy of a Failed IMF Program : The 1999 Program in Turkey," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 40(3), pages 84-100, May.
    3. repec:spo:wpecon:info:hdl:2441/3003 is not listed on IDEAS
    4. Oya Pınar Ardıc & Faruk Selcuk, 2006. "The dynamics of a newly floating exchange rate: the Turkish case," Applied Economics, Taylor & Francis Journals, vol. 38(8), pages 931-941.
    5. Murat Tasdemir & Abdullah Yalama, 2010. "Inter-Regional Volatility Spillovers Between Emerging Capital Markets: Evidence From Turkey And Brazil," Working Papers 2010/8, Turkish Economic Association, revised Jan 2010.
    6. Oya Celasun & R. Gaston Gelos & Alessandro Prati, 2004. "Obstacles to disinflation: what is the role of fiscal expectations?," Economic Policy, CEPR;CES;MSH, vol. 19(40), pages 441-481, October.
    7. Levent, Korap, 2006. "An empirical analysis of Turkish inflation (1988-2004): some non-monetarist estimations," MPRA Paper 19630, University Library of Munich, Germany.
    8. Gã–Khan ÇApogâ¬Lu, 2004. "Anatomy of a Failed IMF Program : The 1999 Program in Turkey," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 40(3), pages 84-100, May.
    9. Aykut Kibritcioglu, 2004. "A Short Review of the Long History of Turkish High Inflation," Economics Bulletin, AccessEcon, vol. 28(2), pages 1.
    10. Kaya, Huseyin, 2013. "The yield curve and the macroeconomy: Evidence from Turkey," Economic Modelling, Elsevier, vol. 32(C), pages 100-107.
    11. Faruk Selçuk, 2005. "The Policy Challenge with Floating Exchange Rates: Turkey’s Recent Experience," Open Economies Review, Springer, vol. 16(3), pages 295-312, July.
    12. Ardic Oya Pinar & Yuzereroglu Uygar, 2009. "How Do Individuals Choose Banks? An Application to Household Level Data from Turkey," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-26, June.
    13. Aytac, Ozlem, 2015. "A model of a heterodox exchange rate based stabilization," Economic Modelling, Elsevier, vol. 46(C), pages 100-117.
    14. Kaya, Huseyin, 2013. "Forecasting the yield curve and the role of macroeconomic information in Turkey," Economic Modelling, Elsevier, vol. 33(C), pages 1-7.
    15. Jérôme Creel & Günes Kamber, 2004. "Debt, deficits and inflation on the road to the EU: the case of Turkey," Revue de l'OFCE, Presses de Sciences-Po, vol. 91(5), pages 157-174.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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