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Inflation, Output Growth, and Stabilization in Turkey, 1980-2002

Selahattin Dibooglu and Aykut Kibritçioğlu ()

Macroeconomics from University Library of Munich, Germany

Abstract: Using a dynamic aggregate supply and aggregate demand model with imperfect capital mobility and structural VARs, we decompose inflation and output movements into those attributable to terms of trade, supply, balance-of-payments, fiscal, and monetary shocks. Empirical results show that terms of trade shocks have a significant negative effect on inflation in the short run. In the long run, monetary, and balance of payments shocks dominate while budget deficits play a limited role in the inflationary process. Demand shocks have limited effects on output movements; output is mostly driven by terms of trade and supply shocks. The results highlight the importance of a credible disinflation program and structural reform that restrain discretionary aggregate demand policies.

Keywords: Causes and effects of inflation; inflation theories; stabilization policy; theory of aggregate supply and aggregate demand; time series models; Turkish economy (search for similar items in EconPapers)
JEL-codes: E31 E23 F41 C32 (search for similar items in EconPapers)
Date: 2003-06-04
Note: Type of Document - Acrobat Reader/PDF; prepared on PC; to print on any printer; pages: 33 ; figures: included
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