IDEAS home Printed from https://ideas.repec.org/a/zbw/espost/110204.html
   My bibliography  Save this article

Causes of Inflation in Turkey: A Literature Survey with Special Reference to Theories of Inflation

Author

Listed:
  • Kibritçioğlu, Aykut

Abstract

Turkey has experienced high and persistent inflation for more than twenty years. This chapter attempts firstly to survey the extremely broad literature on theories of inflation, in order to be able to classify, understand and discuss the dynamics of inflation more carefully. In this chapter, it is mainly argued that inflation may be interpreted as a net result of sophisticated and continuous interactions of demand-side (or monetary) shocks, supply-side (or real) shocks, price-adjustment (or inertial) factors and political processes (or institutional factors). The second aim of the chapter is to compare the existing empirical studies on Turkish inflation, by considering their sample period, data frequency, empirical methods, modeled macroeconomic variables and main results. Most of the studies reviewed here seem to have focused primarily on demand-side determinants (e. g., monetary growth and budget deficits), and partially on some supply-side factors (e. g., nominal exchange rates and oil prices). On the other hand, the components, degree and effects of inflation inertia need to be investigated in more detail. In the future, the modeling attempts of the inflationary dynamics in Turkey would profit from the so-called “new political macroeconomics” because the role of the political process and institutions is not a weak explanatory factor of Turkish inflation that is easily ignored.

Suggested Citation

  • Kibritçioğlu, Aykut, 2002. "Causes of Inflation in Turkey: A Literature Survey with Special Reference to Theories of Inflation," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, pages 43-76.
  • Handle: RePEc:zbw:espost:110204
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/110204/1/Kibritcioglu_2002_ch3-v2.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Paul Beckerman, 1992. "The Economics of High Inflation," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-21713-7, October.
    2. N. Gregory Mankiw, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model of Monopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(2), pages 529-538.
    3. Baumol, William J, 1972. "Macroeconomics of Unbalanced Growth: Reply," American Economic Review, American Economic Association, vol. 62(1), pages 150-150, March.
    4. Marvin J. Barth III & Valerie A. Ramey, 2002. "The Cost Channel of Monetary Transmission," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 199-256, National Bureau of Economic Research, Inc.
    5. De Santis, Roberto, 1993. "An Error Correction Monetary Model Explaining The Inflationary Process In Turkey," Economic Research Papers 268615, University of Warwick - Department of Economics.
    6. Ibrahim Tutar & Aysit Tansel, 2000. "Political Business Cycles, Institutional Structure and Budget Deficits in Turkey?," Working Papers 2019, Economic Research Forum, revised 07 Jun 2000.
    7. Marvin Goodfriend & Robert G. King, 1997. "The New Neoclassical Synthesis and the Role of Monetary Policy," NBER Chapters, in: NBER Macroeconomics Annual 1997, Volume 12, pages 231-296, National Bureau of Economic Research, Inc.
    8. A. Smithies, 1942. "The Behavior of Money National Income Under Inflationary Conditions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 57(1), pages 113-128.
    9. H. Sonmez Atesoglu & Donald Dutkowsky, 1995. "Money, output and prices in Turkey," Applied Economics Letters, Taylor & Francis Journals, vol. 2(2), pages 38-41.
    10. Fielding, David & Bleaney, Michael, 2000. "Monetary Discipline and Inflation in Developing Countries: The Role of the Exchange Rate Regime," Oxford Economic Papers, Oxford University Press, vol. 52(3), pages 521-538, July.
    11. Metin, Kivilcim, 1998. "The Relationship between Inflation and the Budget Deficit in Turkey," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 412-422, October.
    12. Thomas J. Sargent & Neil Wallace, 1984. "Some Unpleasant Monetarist Arithmetic," Palgrave Macmillan Books, in: Brian Griffiths & Geoffrey E. Wood (ed.), Monetarism in the United Kingdom, pages 15-41, Palgrave Macmillan.
    13. Mr. Fabio Scacciavillani, 1995. "Exchange Rate Movements, Inflation Expectations, and Currency Substitution in Turkey," IMF Working Papers 1995/111, International Monetary Fund.
    14. Thomas M. Humphrey, 1998. "Historical origins of the cost-push fallacy," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 53-74.
    15. Alberto Alesina & Nouriel Roubini & Gerald D. Cohen, 1997. "Political Cycles and the Macroeconomy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262510944, April.
    16. Selahattin Dibooglu & Aykut Kibritcioglu, 2001. "Inflation, Output, and Stabilization in a High Inflation Economy: Turkey, 1980-2000," Macroeconomics 0107003, University Library of Munich, Germany, revised 26 Jul 2001.
    17. Fry, Maxwell J., 1980. "Money, interest, inflation and growth in Turkey," Journal of Monetary Economics, Elsevier, vol. 6(4), pages 535-545, October.
    18. McCallum, Bennett T., 1990. "Inflation: Theory and evidence," Handbook of Monetary Economics, in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 2, chapter 18, pages 963-1012, Elsevier.
    19. O. Cevdet Akcay & C. Emre Alper & Suleyman Ozmucur, 1996. "Budget Deficit, Money Supply and Inflation: Evidence from Low and High Frequency Data for Turkey," Working Papers 1996/02, Bogazici University, Department of Economics.
    20. Vogel, Robert C, 1974. "The Dynamics of Inflation in Latin America, 1950-1969," American Economic Review, American Economic Association, vol. 64(1), pages 102-114, March.
    21. Robert J. Gordon, 1997. "The Time-Varying NAIRU and Its Implications for Economic Policy," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 11-32, Winter.
    22. Ruge-Murcia, Francisco J., 1999. "Government expenditure and the dynamics of high inflation," Journal of Development Economics, Elsevier, vol. 58(2), pages 333-358, April.
    23. Woodford, Michael, 2001. "Fiscal Requirements for Price Stability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(3), pages 669-728, August.
    24. M. I. Nadiri, 1987. "Price Inertia and Inflation: Evidence and Theoretical Rationale," International Economic Association Series, in: Luigi Pasinetti & Peter Lloyd (ed.), Structural Change, Economic Interdependence and World Development, chapter 24, pages 329-357, Palgrave Macmillan.
    25. Thomas M. Humphrey, 1981. "Keynes on inflation," Economic Review, Federal Reserve Bank of Richmond, vol. 67(Jan), pages 3-14.
    26. Gordon, Robert J, 1977. "The Theory of Domestic Inflation," American Economic Review, American Economic Association, vol. 67(1), pages 128-134, February.
    27. Taylor, John B., 1999. "Staggered price and wage setting in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 15, pages 1009-1050, Elsevier.
    28. C. Emre Alper & Murat Ucer, 1998. "Some Observations on Turkish Inflation: A ''Random Walk'' Down the Past Decade," Working Papers 1998/02, Bogazici University, Department of Economics.
    29. Robert G. King, 2000. "The new IS-LM model : language, logic, and limits," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 45-103.
    30. Julio H. G. Olivera, 1967. "Money, prices and fiscal lags: a note on the dynamics of inflation," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 20(82), pages 258-267.
    31. Julio H. G. Olivera, 1967. "Money, prices and fiscal lags: a note on the dynamics of inflation," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 20(82), pages 258-267.
    32. Ms. Laura Papi & Ms. G. C. Lim, 1997. "An Econometric Analysis of the Determinants of Inflation in Turkey," IMF Working Papers 1997/170, International Monetary Fund.
    33. Jacobs, Rodney L, 1977. "Hyperinflation and the Supply of Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 9(2), pages 287-303, May.
    34. 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.
    35. Laurence Ball, 1993. "The Dynamics of High Inflation," NBER Working Papers 4578, National Bureau of Economic Research, Inc.
    36. Akcay, O. Cevdet & Alper, C. Emre & Karasulu, Meral, 1997. "Currency substitution and exchange rate instability: The Turkish case," European Economic Review, Elsevier, vol. 41(3-5), pages 827-835, April.
    37. Thomas M. Humphrey, 1986. "Essays on inflation," Monograph, Federal Reserve Bank of Richmond, number 1986eo.
    38. 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.
    39. Faruk Seļuk, 1997. "GMM estimation of currency substitution in a high-inflation economy: evidence from Turkey," Applied Economics Letters, Taylor & Francis Journals, vol. 4(4), pages 225-227.
    40. Pierre L. Siklos (ed.), 1995. "Great Inflations of the 20th Century," Books, Edward Elgar Publishing, number 546.
    41. Metin, Kivilcim, 1995. "An Integrated Analysis of Turkish Inflation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 57(4), pages 513-531, November.
    42. Peter J. Montiel, 1989. "Empirical Analysis of High-Inflation Episodes in Argentina, Brazil, and Israel," IMF Staff Papers, Palgrave Macmillan, vol. 36(3), pages 527-549, September.
    43. Erin Yeldan & †mit Cizre-Sakallioglu, 1999. "Dynamics of Macroeconomic Disequilibrium and Inflation in Turkey : The State, Politics, and the Marketsunder a Globalized Developing Economy," Working Papers 9910, Department of Economics, Bilkent University.
    44. Pierre-Richard Agénor & Mr. Willy A Hoffmaister, 1997. "Money, Wages and Inflation in Middle-Income Developing Countries," IMF Working Papers 1997/174, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mr. Daniel Leigh & Mr. Marco Rossi, 2002. "Leading Indicators of Growth and Inflation in Turkey," IMF Working Papers 2002/231, International Monetary Fund.
    2. Us, Vuslat, 2004. "Inflation dynamics and monetary policy strategy: some prospects for the Turkish economy," Journal of Policy Modeling, Elsevier, vol. 26(8-9), pages 1003-1013, December.
    3. Levent, Korap, 2007. "Impact of Exchange Rate Changes on Domestic Inflation: he Turkish Experience," MPRA Paper 19589, University Library of Munich, Germany.
    4. Oya Celasun & R. Gaston Gelos & Alessandro Prati, 2004. "Would "Cold Turkey" Work in Turkey?," IMF Staff Papers, Palgrave Macmillan, vol. 51(3), pages 493-509, November.
    5. Ebrahim, M. Shahid & Mathur, Ike, 2007. "Pricing home mortgages and bank collateral: A rational expectations approach," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1217-1244, April.
    6. Imran Khan & Darshita Fulara Gunwant, 2023. "Is the remittance inflow to the Turkish economy sustainable? A glimpse of the future through the lens of the past," Review of Applied Socio-Economic Research, Pro Global Science Association, vol. 25(1), pages 34-51, June.
    7. Hasan Engin Duran & Burak Dindaroğlu, 2021. "Regional inflation persistence in Turkey," Growth and Change, Wiley Blackwell, vol. 52(1), pages 460-491, March.
    8. Ümit Özlale & Kivilcim Metin Ozcan, 2005. "Does Time Inconsistency Problem Apply For Turkish Monetary Policy?," Working Papers 2005/2, Turkish Economic Association.
    9. Levent, Korap, 2007. "Impact of Exchange Rate Changes on Domestic Inflation: he Turkish Experience," MPRA Paper 19589, University Library of Munich, Germany.
    10. Ozturk, Ilhan, 2002. "Velocity Effect On Inflationary Growth of Turkey: Evidence From Co-integration Analysis and Granger's Causality Test," MPRA Paper 259, University Library of Munich, Germany.
    11. Ilker Domac, 2003. "Explaining and Forecasting Inflation in Turkey," Working Papers 0306, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    12. Ebrahim, M. Shahid, 2009. "Can an Islamic model of housing finance cooperative elevate the economic status of the underprivileged?," Journal of Economic Behavior & Organization, Elsevier, vol. 72(3), pages 864-883, December.
    13. Korap, Levent & Saatçioğlu, Cem, 2009. "New time series evidence for the causality relationship between inflation and inflation uncertainty in the Turkish economy," MPRA Paper 19246, University Library of Munich, Germany.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Aykut Kibritcioglu, 2004. "A Short Review of the Long History of Turkish High Inflation," Economics Bulletin, AccessEcon, vol. 28(2), pages 1.
    2. Akhand Akhtar Hossain, 2009. "Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 12777.
    3. Dibooglu, Sel & Kibritcioglu, Aykut, 2004. "Inflation, output growth, and stabilization in Turkey, 1980-2002," Journal of Economics and Business, Elsevier, vol. 56(1), pages 43-61.
    4. Zeren, Fatma & Korap, Levent, 2010. "A cost-based empirical model of the aggregate price determination for the Turkish economy: a multivariate cointegration approach," MPRA Paper 23655, University Library of Munich, Germany.
    5. Catao, Luis A.V. & Terrones, Marco E., 2005. "Fiscal deficits and inflation," Journal of Monetary Economics, Elsevier, vol. 52(3), pages 529-554, April.
    6. Us, Vuslat & Ozcan, Kıvılcım Metin, 2005. "Optimal univariate expectations under high and persistent inflation: new evidence from Turkey," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 346(3), pages 499-517.
    7. Mr. Jean-Claude Nachega, 2005. "Fiscal Dominance and Inflation in the Democratic Republic of the Congo," IMF Working Papers 2005/221, International Monetary Fund.
    8. Ümit Özlale & Kivilcim Metin Ozcan, 2005. "Does Time Inconsistency Problem Apply For Turkish Monetary Policy?," Working Papers 2005/2, Turkish Economic Association.
    9. Levent, Korap, 2006. "An empirical analysis of Turkish inflation (1988-2004): some non-monetarist estimations," MPRA Paper 19630, University Library of Munich, Germany.
    10. Matias Vernengo, 2005. "Money and Inflation: A Taxonomy," Working Paper Series, Department of Economics, University of Utah 2005_14, University of Utah, Department of Economics.
    11. Jérôme Creel & Günes Kamber, 2004. "Debt, deficits and inflation on the road to the EU: the case of Turkey," Revue de l'OFCE, Presses de Sciences-Po, vol. 91(5), pages 157-174.
    12. Lin, Hsin-Yi & Chu, Hao-Pang, 2013. "Are fiscal deficits inflationary?," Journal of International Money and Finance, Elsevier, vol. 32(C), pages 214-233.
    13. Jackson, Emerson Abraham & Tamuke, Edmund & Jabbie, Mohamed, 2019. "Disaggregated Short-Term Inflation Forecast (STIF) for Monetary Policy Decision in Sierra Leone," MPRA Paper 96735, University Library of Munich, Germany, revised 26 Nov 2019.
    14. Coricelli, Fabrizio & Rocha, Roberto de Rezende, 1991. "Stabilization programs in Eastern Europe : a comparative analysis of the Polish and Yugoslav programs of 1990," Policy Research Working Paper Series 732, The World Bank.
    15. Oya Celasun & R. Gaston Gelos & Alessandro Prati, 2004. "Would "Cold Turkey" Work in Turkey?," IMF Staff Papers, Palgrave Macmillan, vol. 51(3), pages 493-509, November.
    16. Mankiw, N Gregory, 2001. "The Inexorable and Mysterious Tradeoff between Inflation and Unemployment," Economic Journal, Royal Economic Society, vol. 111(471), pages 45-61, May.
    17. Fatma Zeren & Levent Korap, 2010. "A Cost-based Empirical Model of the Aggregate Price Determination for the Turkish Economy: A Multivariate Cointegration Approach," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 57(2), pages 173-188, June.
    18. Ozturk, Ilhan, 2002. "Velocity Effect On Inflationary Growth of Turkey: Evidence From Co-integration Analysis and Granger's Causality Test," MPRA Paper 259, University Library of Munich, Germany.
    19. Ruge-Murcia, Francisco J., 1999. "Government expenditure and the dynamics of high inflation," Journal of Development Economics, Elsevier, vol. 58(2), pages 333-358, April.
    20. JACKSON Emerson Abraham & TAMUKE Edmund & JABBIE Mohamed, 2019. "Disaggregated Short-Term Inflation Forecast (Stif) For Monetary Policy Decision In Sierra Leone," Revista Economica, Lucian Blaga University of Sibiu, Faculty of Economic Sciences, vol. 71(3), pages 31-53, November.

    More about this item

    Keywords

    Inflation theories; Turkey; causes of inflation; political economy of inflation;
    All these keywords.

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:espost:110204. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/zbwkide.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.