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Would "Cold Turkey" Work in Turkey?

R. Gaston Gelos, Alessandro Prati and Oya Celasun

No 2003/049, IMF Working Papers from International Monetary Fund

Abstract: Persistently high inflation rates have led many to believe that inflation in Turkey has become "inertial," posing an obstacle to disinflation. We assess the empirical validity of this argument. We find that the current degree of inflation persistence in Turkey is lower than in Brazil and Uruguay prior to their successful stabilization programs. More significantly, expectations of future inflation are more important than past inflation in shaping the inflation process, providing little evidence of "backward-looking" behavior. Using survey data, we find that inflation expectations, in turn, depend largely on the evolution of fiscal variables.

Keywords: WP; price; cost; Turkey; variable; Inflation; inertia; price rigidities; stabilization; inflation expectation; disinflation strategy; inflation persistence; disinflation attempt; CPI index; Inflation persistence; Disinflation; Government debt management; Fiscal stance (search for similar items in EconPapers)
Pages: 20
Date: 2003-03-01
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Working Paper: Would “Cold Turkey” Work in Turkey? (2010) Downloads
Journal Article: Would "Cold Turkey" Work in Turkey? (2004) Downloads
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Handle: RePEc:imf:imfwpa:2003/049