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Inflation, Output, and Stabilization in a High Inflation Economy: Turkey, 1980-2000

Selahattin Dibooglu and Aykut Kibritçioğlu ()

Macroeconomics from University Library of Munich, Germany

Abstract: This paper surveys and examines the sources of fluctuations in inflation and output in Turkey. Using a dynamic open economy aggregate supply - aggregate demand model with imperfect capital mobility and structural vector-autoregressions, the authors consider real oil price, supply, balance of payments, real demand, and monetary disturbances. Empirical results indicate that inflation is driven by monetary and real demand disturbances while output is mainly driven by aggregate supply disturbances. The historical decomposition shows that a substantial portion of inflation is aggregate demand-driven core inflation. A credible disinflation program accompanied by structural reform is likely to stabilize the economy with little output costs.

Keywords: Stabilization Policy - Turkey; Inflation- Causes and Effects; Inflation Theories; Turkey- Macroeconomic Developments; Macroeconomics - Theory of Aggregate Supply and Aggregate Demand; Time Series Models (search for similar items in EconPapers)
JEL-codes: E31 E23 F41 C32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec
Date: 2001-07-25, Revised 2001-07-26
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