Frisch Demand Functions and Intertemporal Behaviour in Consumption: The Turkish Case

This paper examines the intertemporal behaviour in consumption for Turkey which has been experiencing high and chronic inflation since the late 1970s. The Frisch demand system is used to estimate three separate but inextricably intertemporal elasticities: intertemporal price elasticities of demand, commodity-specific intertemporal elasticities, and the intertemporal substitution elasticity of consumption. Our main result is that the Turkish households are reluctant to move their expenditures on non-durable goods from the current period to the next period, regardless of how high nominal interest rates are. This interesting result shows that the consumption behaviour in Turkey has been mainly shaped by uncertainty created by inflationary process and the tendency towards hedging against inflation.

Frisch Demand Functions and Intertemporal Behaviour in Consumption: The Turkish Case

This paper examines the intertemporal behaviour in consumption for Turkey which has been experiencing high and chronic inflation since the late 1970s. The Frisch demand system is used to estimate three separate but inextricably intertemporal elasticities: intertemporal price elasticities of demand, commodity-specific intertemporal elasticities, and the intertemporal substitution elasticity of consumption. Our main result is that the Turkish households are reluctant to move their expenditures on non-durable goods from the current period to the next period, regardless of how high nominal interest rates are. This interesting result shows that the consumption behaviour in Turkey has been mainly shaped by uncertainty created by inflationary process and the tendency towards hedging against inflation

Political Business Cycles in the Parliamentary Systems : Evidence from Turkey

This paper empirically investigates the existence of political business cycles in Turkey for the 1986-97 period. Turkey presents an interesting case, with high and chronic inflation problems continuing since the mid-1970s. Political surfing and manipulative hypotheses about the behavior of the governments in a parliamentary system are tested by using probit and logit estimation procedures that include the election timing as an endogenous variable. We found that the governments manipulated the economy to increase their chances to be reelected through money supply and government expenditures during the sample period, causing the stabilization programs to loose their credibility and thus the inflation problem to continue.credibility, inflation, political business cycles,

Real Convergence in Some OECD Countries

The purpose of this letter is to re-examine the convergence hypothesis for 21 OECD countries during the period of 1950-2008. Our nonlinear unit root procedures are able to reject the existence of a unit root in both the de-meaned output and the output gap series from USA series for 21 OECD countries, wheraes the linear ADF test fails to do so, providing some supportive evidence of nonlinear convergence in the outputs.

Stochastic behaviour of the real exchange rate for Jordan: a re-examination

The purpose of this article is to re-examine the validity of the long-run purchasing power parity (PPP) hypothesis for Jordan. Using a Markov-switching model, we provide some evidence that the real exchange rate of Jordan is stationary during periods of low real exchange rate volatility and nonstationary during periods of high real exchange rate volatility.

Current account and exchange rate dynamics under an inflation targeting regime

Ilıkan Özgür, Munise ( Aksaray, Yazar )Türkiye'de 2001 yılında yapılan yasal düzenleme ile birlikte, para politikasının birincil hedefi fiyat istikrarının sağlanması olarak belirlenmiş ve enflasyon hedefleme stratejisi benimsenmiştir. Bununla birlikte, 2000'li yıllarda enflasyonu düşürme çabalarının yanısıra cari açık ciddi bir problem haline gelmiştir. Bu çalışmada, ilk olarak enflasyon hedeflemesinin benimsendiği dışa açık bir ekonomide para politikası amaçları ile araçları arasındaki ilişkiler ortaya konulmakta ve Türkiye ekonomisinde para politikası şoklarının cari işlemler hesabı ve reel döviz kuru üzerine etkileri tahmin edilmektedir. Tahmin sonuçlarımız, pozitif para politikası şokunun kısa dönemde cari işlemler hesabı üzerinde olumlu etki yarattığını, ancak bu etkinin uzun dönemde ortadan kalktığını göstermektedir. Bulgularımız, Yeni Açık Ekonomi Makro Ekonomi literatüründe öncü konumundaki redux modelin öngörüleri ile tutarlıdır.Maintaining price stability has been assigned as the primary objective of monetary policy and the inflation targeting regime has been adopted by the new legal arrangement made in 2001 in Turkey. However, the current account deficit has become a serious problem along with the efforts to decrease inflation during 2000s. In this study, after explaining the relationship between the goals and instruments of monetary policy in an open economy where an inflation targeting regime is implemented, we estimate the effects of monetary policy shocks on the current account and the real exchange rate in the Turkish economy. Our results from the structural VAR estimation show that a positive nominal shock has an favorable effect on the current account in the short run which disappeared in the long run. Our findings are consistent with the predictions of the redux model on which the New Open Economy Macroeconomy literature has been developed

Investigating the Time Varying Nature of the Link between Inflation and Currency Substitution in the Turkish Economy

This study investigates the relationship between the rate of inflation and the degree of the currency substitution for Turkey during 1986-2006. Our results show that the correlation coefficient between the two variables has not been constant over time. The results of the Multivariate GARCH model estimated to obtain the correlation coefficients indicate that there is a nonlinear relationship between the inflation rate and the degree of currency substitution. The main policy implication of our study is that it is difficult to stop or to reverse the currency substitution unless a confidence in the domestic currency is established.Currency substitution; M-GARCH

Political instability, political freedom and inflation

Using a dynamic panel data approach, we estimate the impact of the political and institutional factors on inflation. Estimation results show that a lower degree of political instability generates lower inflation only for developed and low-inflation countries. However, when political freedom is taken into account, political instability appears to be influential on inflation also for developing countries and turns out to be significant only for high-inflation countries. Such findings emphasize the inflation-reducing effects of political stability depending on democratic political structure.

Nonlinearity and structural stability in the Phillips curve: Evidence from Turkey

In this paper, we investigate possible nonlinearities in the inflation-output relationship in Turkey for the 1980-2008 period. We first estimate a linear bivariate model for the inflation rate and output gap, and test for linearity of the estimated model against nonlinear alternatives. Linearity test results suggest that the relationship between the inflation rate and output gap is highly nonlinear. We estimate a bivariate time-varying smooth transition regression model, and compute dynamic effects of one variable on the other by generalized impulse response functions. Computed impulse response functions indicate that inflation-output relationship in Turkey during the analyzed period was regime dependent and varied considerably across time.Phillips curve Nonlinearity Structural stability