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Inflation Targeting and Inflation Convergence within Turkey

  • Yilmazkuday, Hakan

Using a disaggregated level CPI data, this paper compares bilateral convergence properties of Turkish regional inflation rates between pre-inflation-targeting and inflation-targeting periods. Rather than using an ad hoc date for the introduction of inflation-targeting regime, structural break dates are estimated for Turkish national inflation rate as well as the standard deviation of Turkish regional inflation rates. The first moment of Turkish national inflation rate has an estimated break at the beginning of explicit inflation-targeting regime in January 2002, and the second moment of Turkish regional inflation rates has an estimated break at the financial crisis in February 2001 after which Turkey adopted a flexible exchange rate. It is found that during the inflation-targeting period, Turkish regional inflation rates have converged to each other in terms of CPI groups with relatively non-tradable components, and they have diverged from each other in terms of CPI groups with relatively tradable components.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 16770.

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Date of creation: 2009
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Handle: RePEc:pra:mprapa:16770
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