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Exchange Rates and the Money Demand Process during the Persistently High Inflation Period in the Turkish Economy: Causes and Dynamics

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  • Savaþ Bilal

    (Aksaray University)

Abstract

The money demand process in Turkey during the period 1987:1-2002:3 can be explained better in the sense of Cagan (1956) rather than in the sense of Sargent et al.(1973).Cagan assumes the exogeneity of money. Sargent et al. suggest the endogeneity of money. Implicitly, the money supply process with regard to Turkish inflation is unpredictable with respect to the past history of prices, i.e. either inflation or currency depreciation. Therefore, the Turkish monetary regime may be described as a random walk monetary standard with short-term (myopic) discretionary policies used by the authorities. Moreover, the unpredictable money growth implies that the Central Bank’s passive monetary policy implementations help maintain the persistently high inflationary process in Turkey.

Suggested Citation

  • Savaþ Bilal, 2008. "Exchange Rates and the Money Demand Process during the Persistently High Inflation Period in the Turkish Economy: Causes and Dynamics," Working Papers 2008/2, Turkish Economic Association, revised Feb 2008.
  • Handle: RePEc:tek:wpaper:2008/2
    as

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    File URL: http://www.tek.org.tr/dosyalar/ExchangeRateBasedPricing.pdf
    File Function: Revised version, 2008
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    References listed on IDEAS

    as
    1. Yýlmaz Akyüz, "undated". "Global Rules and Markets: Constraints over Policy Autonomy in Developing Countries," Working Papers 2007/5, Turkish Economic Association.
    2. Wade, Robert Hunter, 2003. "What strategies are viable for developing countries today? The World Trade Organization and the shrinking of ‘development space’," LSE Research Online Documents on Economics 28239, London School of Economics and Political Science, LSE Library.
    3. Anne O. Krueger, 1974. "Foreign Trade Regimes and Economic Development: Turkey," NBER Books, National Bureau of Economic Research, Inc, number krue74-1, January.
    4. Yılmaz AKYÜZ, 2007. "Global rules and markets: Constraints over policy autonomy in developing countries," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 22(257), pages 5-43.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Demand for Money; High Inflation; Granger Causality; Exogeneity of Money; Endogeneity of Money; Exchange Rate-Based Pricing;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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