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

Listed author(s):
  • Savaþ Bilal

    (Aksaray University)

Registered author(s):

    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.

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    File Function: Revised version, 2008
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    Paper provided by Turkish Economic Association in its series Working Papers with number 2008/2.

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    Length: 22 pages
    Date of creation: 2008
    Date of revision: Feb 2008
    Handle: RePEc:tek:wpaper:2008/2
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