Inflation persistence in Turkey: A TVP-estimation approach

Berk Bilici and Semih Çekin

The Quarterly Review of Economics and Finance, 2020, vol. 78, issue C, 64-69

Abstract: We analyze inflation dynamics in Turkey by estimating inflation persistence for the period 1990–2018. Inflation persistence is defined as the speed with which inflation returns to its equilibrium level (long-term mean) after a shock and we apply a time-varying parameter estimation method based on the Kalman filter. We find that inflation persistence increases and exhibits high volatility in periods of high inflation in which inflation expectations and pricing behaviors are negatively affected. We further find that with institutional changes in the conduct of monetary policy, inflation started to decline after 2003 and inflation became less persistent. Monetary policy appears to be effective at maintaining price stability until 2016. Empirical results show that there is a significant rise in inflation persistence starting in 2016 accompanied by an upward trend in inflation.

Keywords: Inflation persistence; Time-varying parameter model; Mean reversion (search for similar items in EconPapers)
JEL-codes: C22 E31 E52 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:78:y:2020:i:c:p:64-69

DOI: 10.1016/j.qref.2020.04.002

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