Monetary policy in high inflation open economies: evidence from Israel and Turkey

Sushanta Mallick () and Mohammed Mohsin ()

International Journal of Finance & Economics, 2007, vol. 12, issue 4, 405-415

Abstract: With quarterly data from Israel and Turkey we estimate generalized impulse response functions to show that inflation has no long-run real effects on consumption, investment and the current account balance. The findings are robust even after allowing for inflation volatility obtained through GARCH estimates. We develop an inter-temporal optimizing model of a small open economy with a fixed rate of time preference that supports the empirics. Our model, thus, extends the super-neutrality results (à la Sidrausky) in an open economy paradigm. Copyright © 2007 John Wiley & Sons, Ltd.

Date: 2007
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DOI: 10.1002/ijfe.324

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