Measuring Disinflation Credibility in Emerging Markets: A Bayesian Approach with an Application to Turkey's IMF-Supported Program

Abstract

This paper proposes a new empirical measure of disinflation credibility and applies it to the IMF-supported disinflation program in Turkey since the 2001 crisis. This measure relies only on the consumer price index and can thus be easily applied in countries in which asset prices and survey inflation expectations are not available or reliable. The application to Turkey's shows that it is less volatile and hence more reliable than a survey-expectation based measure.