Relative price variability and the Philips curve: Evidence from Turkey

We argue that relative price changes are a key component of the Phillips curve relationship between inflation and output. Building on work by Ball and Mankiw, we propose including measures of the variances and skewness of relative price adjustment in an otherwise standard model of the Phillips curve. We examine the case of Turkey, where distribution of price changes is especially skewed and where the existence of a Phillips curve has been questioned. We have two main findings: (i) inclusion of measures of the distribution of relative price changes improves our understanding of the Phillips curve trade-off; (ii) there is no evidence of such a trade-off if these measures are not included

Spillovers from one country’s sovereign debt to CDS (Credit Default Swap) spreads of others during the European crisis: A Spatial Approach

This paper examines the interactions among CDS spreads across 13 European countries using spatial econometrics techniques. Our model allows for the estimation of direct and indirect transmission of sovereign risk and feedback effects across the network of these countries. The novelty of this paper is to link macroeconomic variables and CDS spreads in a new context of analysis to uncover new channels affecting sovereign risk across countries during the European debt crisis. We show that the key channel in driving sovereign risk spillovers is trade linkages between the countries. Our results also reveal that a country’s CDS spread is approximately 7 basis points (bps) higher for a 1% increase in public debt-to-GDP levels while that increase in indebtedness is associated with roughly 2 bps higher spreads in all other countries

The spillover effects of public capital on the Turkish private manufacturing industries in the geographical regions

C32, L60, R00,