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Inflation Targeting in Turkey

Author

Listed:
  • Hasan Ersel

    () (Sabanci University, , Istanbul, Turkey)

  • Fatih Özatay

    () (TOBB University of Economics and Technology, Ankara, Turkey)

Abstract

In the aftermath of the 2000-2001crisis the banking sector in Turkey was in turbulence requiring immediate action. The rescue operation sky-rocketed the public debt-to-gross domestic product ratio. The fiscal dominance caused by high public debt put a severe constraint on the conduct of monetary policy. Other challenges were the high exchange rate pass-through, inflation inertia, and the weak banking sector. This paper provides an account of the monetary policy experience of Turkey after the crisis. It focuses on the reasons behind adopting informal inflation targeting, i.e. a transition phase, before moving into formal inflation targeting in 2006.

Suggested Citation

  • Hasan Ersel & Fatih Özatay, 2008. "Inflation Targeting in Turkey," Working Papers 445, Economic Research Forum, revised 09 Jan 2008.
  • Handle: RePEc:erg:wpaper:445
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    References listed on IDEAS

    as
    1. 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.
    2. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
    3. World Bank, 2003. "Turkey - Country Economic Memorandum : Towards Macroeconomic Stability and Sustained Growth, Volume 3. Statistical Annex," World Bank Other Operational Studies 14703, The World Bank.
    4. Hakan Kara & Fethi Ogunc, 2005. "Exchange Rate Pass-Through in Turkey : It is Slow, but is it Really Low?," Working Papers 0510, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    5. Sachs, Jeffrey & Tornell, Aaron & Velasco, Andres, 1996. "The Mexican peso crisis: Sudden death or death foretold?," Journal of International Economics, Elsevier, vol. 41(3-4), pages 265-283, November.
    6. Olivier Blanchard, 2004. "Fiscal Dominance and Inflation Targeting: Lessons from Brazil," NBER Working Papers 10389, National Bureau of Economic Research, Inc.
    7. Calvo, Guillermo A, 1988. "Servicing the Public Debt: The Role of Expectations," American Economic Review, American Economic Association, vol. 78(4), pages 647-661, September.
    8. World Bank, 2003. "Turkey - Country Economic Memorandum : Towards Macroeconomic Stability and Sustained Growth, Volume 2. Main Report," World Bank Other Operational Studies 14704, The World Bank.
    9. World Bank, 2003. "Turkey - Country Economic Memorandum : Towards Macroeconomic Stability and Sustained Growth, Volume 1. Summary Report," World Bank Other Operational Studies 14625, The World Bank.
    10. Favero, Carlo A. & Giavazzi, Francesco, 2004. "Inflation Targeting and Debt: Lessons from Brazil," CEPR Discussion Papers 4376, C.E.P.R. Discussion Papers.
    11. Hakan Kara & Hande Kucuk Tuger & Umit Ozlale & Burc Tuger & Devrim Yavuz & Eray M. Yucel, 2005. "Exchange Rate Pass-Through in Turkey : Has it Changed and to What Extent?," Working Papers 0504, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    12. Bernard M. Hoekman & Togan Sübidey, 2005. "Turkey : Economic Reform and Accession to the European Union," World Bank Publications, The World Bank, number 7494.
    13. 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.
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    Cited by:

    1. Nadia Saleem, 2010. "Adopting Inflation Targeting in Pakistan: An Empirical Analysis," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 15(2), pages 51-76, Jul-Dec.

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