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Determinants of Turkish Inflation

Author

Listed:
  • Cem Saatcioglu

    (Istanbul University)

  • Levent Korap

    (Marmara University)

Abstract

The main purpose in this paper is to investigate the determinants of inflationary process in Turkish economy. For this purpose, based on some potential causes of inflation, an empirical model is contructed upon emphasizing the roles of various factors on inflationary process. The results obtained support the view of cost-push inflation led by exchange rate depreciations, wage indexation mechanism, real interest structure and public sector pricing behaviour which is considered some part of wholesale prices, rather than the demand-pull monetary factors. Some other factors such as the course of real effective exchange rate have been found indicating a relieving effect on the cost pressure settled in domestic economy as well. Supporting these arguments, we find that the smaller the growth performance of the economy given the cost-pressure through exchange-rate pass-through effects, wage indexation mechanism and the real interest structure be imposed, the larger would be the inflation structure. These all might also be given as evidence to that the cost-push rather than demand-pull factors would affect the course of Turkish business cycles.

Suggested Citation

  • Cem Saatcioglu & Levent Korap, 2006. "Determinants of Turkish Inflation," Working Papers 2006/7, Turkish Economic Association.
  • Handle: RePEc:tek:wpaper:2006/7
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    File URL: http://www.tek.org.tr/dosyalar/DETERMINANTS%20OF%20TURKISH%20INFLATION.pdf
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    References listed on IDEAS

    as
    1. Calvo, Guillermo A. & Vegh, Carlos A., 1999. "Inflation stabilization and bop crises in developing countries," Handbook of Macroeconomics,in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 24, pages 1531-1614 Elsevier.
    2. Pierre-Richard Agénor & Willy W. Hoffmaister, 1997. "Money, Wages and Inflation in Middle-Income Developing Countries," IMF Working Papers 97/174, International Monetary Fund.
    3. Onis, Ziya & Ozmucur, Suleyman, 1990. "Exchange rates, inflation and money supply in Turkey : Testing the vicious circle hypothesis," Journal of Development Economics, Elsevier, vol. 32(1), pages 133-154, January.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Levent, Korap, 2007. "Modeling purchasing power parity using co-integration: evidence from Turkey," MPRA Paper 19584, University Library of Munich, Germany.
    2. Levent, Korap, 2007. "Structural VAR identification of the Turkish business cycles," MPRA Paper 21971, University Library of Munich, Germany.
    3. Ozgur ASLAN & H. Levent KORAP, 2007. "Monetary Transmission Mechanism In An Open Economy Framework: The Case Of Turkey," Istanbul University Econometrics and Statistics e-Journal, Department of Econometrics, Faculty of Economics, Istanbul University, vol. 5(1), pages 41-66, May.
    4. Levent, Korap, 2007. "Impact of Exchange Rate Changes on Domestic Inflation: he Turkish Experience," MPRA Paper 19589, University Library of Munich, Germany.
    5. Levent, Korap, 2006. "Seigniorage revenue and Turkish economy," MPRA Paper 20106, University Library of Munich, Germany.
    6. Levent, Korap & Özgür, Aslan, 2007. "Exogenous characteristics of short-term capital flows: can they be under control? evidence from Turkey," MPRA Paper 19504, University Library of Munich, Germany.

    More about this item

    Keywords

    Inflation; Turkish Economy; Cost-Push Pressure;

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