Monetary Pressures and Inflation Dynamics in Turkey: Evidence from P-Star Model

Kazim Özdemir and Mesut Saygili ()

Working Papers from Research and Monetary Policy Department, Central Bank of the Republic of Turkey

Abstract: This paper uses the P-star model to explain inflation dynamics in Turkey. In P-star models, money plays an important role by determining the price gap, which is postulated to measure the pressure on prices in the economy. This pressure emerges when output is above the potential, interest rate is lower than the natural rate, or there exists some excess money in the economy. The estimation results with the Turkish data show that the price gap does indeed contain considerable information for explaining inflation dynamics. Moreover, the model selection criterion that compares the empirical performance of the P-star model with the New Classical Phillips curve relationship favors the P-star model over the Phillips curve relationship. We conclude that money is efficacious in predicting risk to price stability in Turkey

Keywords: Money Demand; P-star; Inflation Dynamics (search for similar items in EconPapers)
JEL-codes: E31 E41 E52 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-cba, nep-cwa, nep-mac and nep-mon
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Monetary Pressures and Inflation Dynamics in Turkey: Evidence from P-Star Model (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:tcb:wpaper:0808

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