An Analysis on Growth with Inflation in Turkey

Ferhat Şirin Sökmen, Yunus Açcı, İzzet Taşar

Abstract


Monetary policy aims sustainable economic growth and low inflation together. Those two important macroeconomic variables should be managed very well in order to meet the policy targets. The possible relation between those two should be investigated in order to implement more efficient policies. The direction of the relation is also important. Turkish economy experiences “inflation targeting” strategy, and our analysis covers the period from January 2002 to November 2016. Fort he selected period, the growth and inflation relation will be investigated. In the empirical analysis, first the stationary of the series is checked, and they all added to the analysis in the first differences according to the unit root test employed. Bai-Perron (2003) co-integration test is employed, that test considers the structural breaks and according to test results, the significant breaks are October 2008 and December 2010. In that parallel, the period is divided in to three sub periods. In the first period that starts from January 2002 till September 2008 CPI has a contribution of %0.629 on industry production index. In the second period from October 2008 till November 2010 that contribution is %1.454. Finally in the last sub-period, starts in December 2010 and end in November 2016 the contribution of CPI on industry production index is %0.378. Test results suggest that, in all periods CPI has a positive contribution on industry production index, but the most contribution is in the second period. 


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