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Stylized Facts for Business Cycles in Turkey

  • Harun Alp
  • Yusuf Soner Baskaya
  • Mustafa Kilinc
  • Canan Yuksel

This study documents the stylized facts about the business cycles in Turkey using quarterly data between 1987 and 2009. In particular, we document the business cycle turning points and average duration of cycles for Turkey, as well as the optimal smoothing parameter for Hodrick-Prescott (HP) filter estimated in line with our estimate of average business cycle duration for 1987-2009 period, 20 quarters, which is shorter compared to developed countries, and comparable to other developing countries. For filtering procedure, we use this estimated parameter, in addition to 1600, in HP filter and compare our findings. We find that business cycle relationships between macroeconomic variables in Turkey are mostly in accordance with the patterns observed for developing countries, which significantly differ from developed countries’ business cycle facts. In particular, the real side of the economy is characterized by high volatility of consumption and a countercyclical pattern for net exports. Other important findings are that financial variables such as credit or sovereign spreads are very volatile and strongly correlated with output. In addition, the results show that the properties of the relationship between economic activity, prices and the interest rates differs between pre-2001 and post-2001 period, whereas the relationship among the real variables shows a smaller change between these periods.

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File URL: http://www.tcmb.gov.tr/wps/wcm/connect/TCMB+EN/TCMB+EN/Main+Menu/PUBLICATIONS/Research/Working+Paperss/2012/12-02
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Paper provided by Research and Monetary Policy Department, Central Bank of the Republic of Turkey in its series Working Papers with number 1202.

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Date of creation: 2012
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Handle: RePEc:tcb:wpaper:1202
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  1. Aguiar, Mark & Gopinath, Gita, 2007. "Emerging Market Business Cycles: The Cycle is the Trend," Scholarly Articles 11988098, Harvard University Department of Economics.
  2. Everts, Martin, 2006. "Duration of Business Cycles," MPRA Paper 1219, University Library of Munich, Germany.
  3. Inklaar, Robert & Jacobs, Jan & Romp, Ward, 2003. "Business cycle indexes: does a heap of data help?," CCSO Working Papers 200312, University of Groningen, CCSO Centre for Economic Research.
  4. Ali Hakan Kara, 2006. "Turkish Experience With Implicit Inflation Targeting," Working Papers 0603, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  5. Özbilgin, H. Murat, 2010. "Financial market participation and the developing country business cycle," Journal of Development Economics, Elsevier, vol. 92(2), pages 125-137, July.
  6. Rand, John & Tarp, Finn, 2002. "Business Cycles in Developing Countries: Are They Different?," World Development, Elsevier, vol. 30(12), pages 2071-2088, December.
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  8. Mark Aguiar & Gita Gopinath, 2007. "Emerging Market Business Cycles: The Cycle Is the Trend," Journal of Political Economy, University of Chicago Press, vol. 115, pages 69-102.
  9. Harding, Don & Pagan, Adrian, 2002. "Dissecting the cycle: a methodological investigation," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 365-381, March.
  10. Agenor, Pierre-Richard & McDermott, C John & Prasad, Eswar S, 2000. "Macroeconomic Fluctuations in Developing Countries: Some Stylized Facts," World Bank Economic Review, World Bank Group, vol. 14(2), pages 251-85, May.
  11. Harun ALP & Yusuf Soner BAŞKAYA & Mustafa KILINÇ & Canan YÜKSEL, 2011. "Estimating Optimal Hodrick-Prescott Filter Smoothing Parameter for Turkey," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 26(306), pages 09-23.
  12. Tiryaki S. Tolga, 2012. "Interest Rates and Real Business Cycles in Emerging Markets," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-30, January.
  13. Canova, Fabio, 1993. "Detrending and Business Cycle Facts," CEPR Discussion Papers 782, C.E.P.R. Discussion Papers.
  14. Ozge Akinci & Yasemin Barlas Ozer & Bulent Usta, 2005. "Dolarizasyon Endeksleri : Turkiye’deki Dolarizasyon Surecine Iliskin Gostergeler," Working Papers 0517, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
  15. Reinhart, Carmen & Vegh, Carlos, 1995. "Nominal interest rates, consumption booms, and lack of credibility: A quantitative examination," MPRA Paper 13898, University Library of Munich, Germany.
  16. Leon du Toit, 2008. "Optimal HP filtering for South Africa," Working Papers 07/2008, Stellenbosch University, Department of Economics.
  17. Altug, Sumru & Filiztekin, Alpay & Pamuk, Şevket, 2008. "Sources of long-term economic growth for Turkey, 1880–2005," European Review of Economic History, Cambridge University Press, vol. 12(03), pages 393-430, December.
  18. Rachel Male, 2010. "Developing Country Business Cycles: Characterising the Cycle," Working Papers 663, Queen Mary University of London, School of Economics and Finance.
  19. Morten O. Ravn & Harald Uhlig, 2002. "On adjusting the Hodrick-Prescott filter for the frequency of observations," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 371-375.
  20. Hakan Berument & M. Eray YŸcel & ZŸbeyir Kilin, 2005. "Business Cycles in Turkey and European Union Countries: A Perspective to the Membership," Working Papers 0506, Department of Economics, Bilkent University.
  21. C. Emre Alper, 2000. "Stylized Facts of Business Cycles, Excess Volatility and Capital Flows: Evidence from Mexico and Turkey," Working Papers 2000/11, Bogazici University, Department of Economics.
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