EconPapers    
Economics at your fingertips  
 

On the Link between Dollarisation and Inflation: Evidence from Turkey1

Mohsen Bahmani-Oskooee () and Ilker Domac ()

Comparative Economic Studies, 2003, vol. 45, issue 3, 306-328

Abstract: This paper investigates the role of dollarisation in the dynamics of inflation in Turkey. Descriptive analysis suggests that, in addition to high inflation and economic instability, institutional factors also played an important role in the evolution of dollarisation in Turkey. The empirical findings corroborate the importance of dollarisation in the dynamics of inflation. The results suggest that shocks to dollarisation initially lead to a decline in the monetary base as the public switches from domestic to foreign money holdings. However, the monetary base increases later on to generate the required inflation tax for a given budget deficit. The findings also indicate that the fiscal authority tries to compensate part of the decline in inflation tax through raising administered prices. As expected, the exchange rate responds positively to shocks to dollarisation owing to the high elasticity of substitution between domestic and foreign currency. Comparative Economic Studies (2003) 45, 306–328. doi:10.1057/palgrave.ces.8100022

Date: 2003
References: Add references at CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

Downloads: (external link)
http://www.palgrave-journals.com/ces/journal/v45/n3/pdf/8100022a.pdf Link to full text PDF (application/pdf)
http://www.palgrave-journals.com/ces/journal/v45/n3/full/8100022a.html Link to full text HTML (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pal:compes:v:45:y:2003:i:3:p:306-328

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/41294/PS2

Access Statistics for this article

Comparative Economic Studies is currently edited by Nauro Campos

More articles in Comparative Economic Studies from Palgrave Macmillan, Association for Comparative Economic Studies Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2019-06-05
Handle: RePEc:pal:compes:v:45:y:2003:i:3:p:306-328