Omay, Tolga and Aluftekin, Nilay and Karadagli, Ece C. (2009): The relationship between output growth and inflation: Evidence from Turkey.
Download (220Kb) | Preview
In this study, a bi-variate Generalized Autoregressive Conditional Heteroscedasticty model is used in order to investigate the Granger causality relationships between output growth, inflation rate and their uncertainties. Our test results show that the existence of Granger-causality is observed from nominal uncertainty to inflation, from nominal uncertainty to real uncertainty, from output growth to real uncertainty, from output growth to nominal uncertainty and from inflation to nominal uncertainty. These findings prove that theoretical predictions of Cuikerman and Meltzer (1986), Okun (1971) and Friedman (1977) are valid for the period 1986:6-2007:1 for Turkey. On the other hand, ‘Short-run Phillips Curve’ and ‘Taylor Effect’ have proven empirically to be invalid for Turkey for this sample period. Moreover, we deduce that Turkish inflation is affected by the output growth through the nominal uncertainty channel.
|Item Type:||MPRA Paper|
|Original Title:||The relationship between output growth and inflation: Evidence from Turkey|
|Keywords:||Inflation; output growth; uncertainty; Granger-Causality; bi-variate GARCH.|
|Subjects:||C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models; Multiple Variables > C32 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level; Inflation; Deflation
E - Macroeconomics and Monetary Economics > E0 - General > E00 - General
|Depositing User:||Tolga Omay|
|Date Deposited:||21. Jan 2010 16:32|
|Last Modified:||12. Feb 2013 13:38|
Artan, S. (2006), “Türkiye’de enflasyon, enflasyon belirsizliği ve büyüme”. Türkiye Ekonomi Kurumu Tartışma Metni, 14, 1-19.
Arın, K.P. and Omay, T. (2006), “Inflation and Growth: An Empirical Study for Comparison of Level and Variability Effects”, Trends in Inflation Reasearch, Frank Colombus (ED), Nova Publications.
Ball, L. (1992), “Why does high inflation raise inflation uncertainty?”. Journal of Monetary Economics, 29, 371-388.
Barro, R., and Gordon D. (1983), “Rules, discretion, and reputation in a model of monetary policy”. Journal of Monetary Economics, 12, 101-123.
Berndt, E., Hall, and R., Hausman, J. (1974). “Estimation and inference in nonlinear structural models”. Annals of Economic and Social Measurement, 3, 653-665.
Bollerslev, T. (1990). “Modeling the coherence in short-run nominal exchange rates: a multivariate generalized ARCH model”. Review of Economics and Statistics, 72, 498-505.
Briault, R (1995). “The cost of inflation”. Bank of England Quarterly Bulletin, 35, 33-34.
Cukierman, A. and Meltzer A. (1986). “A theory of ambiguity credibility and inflation under discretion and asymmetric information”. Econometrica, 54 (5), 1099-1128.
Çetin, A. (2004). “Enflasyon, büyüme ve reel-nominal belirsizlikler arasinda nedensellik ilişkileri”. İktisat, İşletme ve Finans, 19 (221), 71-79.
Erdoğan Seyfettin and Hilal Bozkurt (2004). “Türkiye’de 1983-2003 döneminde enflasyon ile enflasyon belirsizliği ilişkisi”. İktisat İşletme ve Finans, 219, 62-71.
Flemming, J.S. (1976) Inflation. Published at London
Fountas S., M. Karnasos, and J. Kim (2002). “Inflation and output growth uncertainty and their relationship with inflation and output growth”. Economic Letters, 75, 293-301.
Fountas, S. and Karanasos, M. (2006). “Inflation, output growth, and nominal and real uncertainty: empirical evidence for the G7”. Journal of International Money and Finance,
Friedman, M. (1977). “Nobel lecture: Inflation and unemployment”. Journal of Political Economy, 85, 451-472
Grier, K. and Perry M. (1998). “On inflation and inflation uncertainty in the G7 countries”. Journal of International Money and Finance, 17, 671-689.
Holland, S. (1995). “Inflation and uncertainty: Tests for temporal ordering”. Journal of Money, Credit, and Banking, 27, 827-837.
Khan, Mohsin S.and Abdelhak Senhadji (2001) “Threshold effects in the relationship between inflation and growth”. IMF Staff Papers, 48(1), 1-21.
Kökocak, K. and Arslan İ. (2006). “Türk ekonomisinin büyümesinin enflasyonun maliyeti boyutu”. Mevzuat Dergisi, 108, 1-9.
Nas, T.F. and Perry M. (2000) “Inflation, inflation uncertainty, and monetary policy in Turkey: 1960-1998. Contemporary Economic Policy, 18(2),170-180.
Okun, A. (1971) “The mirage of steady state inflation”. Brookings Papers on Economic Activity, 2, 485-498
Omay,T. and Hasanov, M., “The Effects of Inflation Uncertainty on Interest Rates: Non-linear Approach. Applied Economics. (Forthcoming)
Pourgerami, A. and Maskus, K. (1987). “The effects of inflation on the predictability of price changes in Latin America: some estimates and policy implications”. World Development, 15 (1), 287-290.
Taylor, John (1979) “Staggered wage setting in the macro model”. American Economic Review, May, 108-113.
Teletar, F. (2003). “Türkiye’de enflasyon, enflasyon belirsizligi ve siyasi belirsizlik arasındaki nedensellik ilişkileri”. İktisat, İşletme ve Finans, 18 (203), 42-51.
Ungar, M. and Zilberfarb, B. (1993) “Inflation and its unpredictadility—theory and empirical evidence” Journal of Money, Credit, and Banking, 25, 709–720.
Wilson, B.K. (2006) “The links between inflation, inflation uncertainty and output growth: New time series evidence from Japan”. Journal of Macroeconomics, 28, 609–62