Causes of Inflation in Turkey: A Literature Survey with Special Reference to Theories of Inflation
Aykut Kibritçioğlu
University of Illinois at Urbana-Champaign
Department of Economics
484 Wohlers Hall
1206 South Sixth Street
Champaign, Illinois 61820
Email: kibritci@politics.ankara.edu.tr
Homepage: http//politics.ankara.edu.tr/~kibritci/
JEL Classification: B22 E31
Abstract
Turkey has experienced high and persistent inflation for more than twenty years. This paper attempts firstly to survey the extremely broad literature on theories of inflation, in order to be able to classify, understand and discuss the dynamics of inflation more carefully. It is mainly argued that inflation may be interpreted as a net result of sophisticated and continuous interactions of demand-side (or monetary) shocks, supply-side (or real) shocks, price-adjustment (or inertial) factors and political processes (or institutional factors). The second aim of the paper is to compare the existing empirical studies on Turkish inflation, by considering their sample period, data frequency, empirical methods, modeled macroeconomic variables and main results. Most of the studies reviewed here seem to have focused primarily on demand-side determinants (e.g., monetary growth and budget deficits), and partially on some supply-side factors (e.g., nominal exchange rates and oil prices). On the other hand, the components, degree and effects of inflation inertia need to be investigated in more detail. It is also noted that, in the future, the modeling attempts of the inflationary dynamics in Turkey would profit from the so-called “new political macroeconomics” because the role of the political process and institutions is not a weak explanatory factor of inflation that is easily ignored.
Last
updated February 19, 2002 by Linda Huff
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