Explaining and Forecasting Inflation in Turkey

The growing adoption of an inflation targeting framework in emerging market economies has increased the importance of understanding inflation dynamics and forecasting its future path in these countries. The author considers the case of Turkey and i...

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Main Author:	Domaç, Ilker
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, D.C. 2013
Subjects:	ADMINISTERED PRICES AGGREGATE DEMAND CENTRAL BANK CENTRAL BANK INDEPENDENCE CENTRAL BANKS CONSUMER PRICE INFLATION CPI DEBT DEMAND CURVE DEMAND FOR MONEY DISEQUILIBRIUM DOMESTIC PRICE DOMESTIC PRICE LEVEL DOMESTIC PRICES ECONOMIC ACTIVITY ELASTICITY EMPIRICAL EVIDENCE EMPIRICAL INVESTIGATIONS EMPIRICAL STUDIES EXCESS DEMAND EXCESS SUPPLY EXCHANGE RATE EXCHANGE RATES EXPANSIONARY MONETARY POLICY EXTERNAL SHOCKS FISCAL ADJUSTMENT FISCAL DEFICIT FISCAL DEFICITS FISCAL POLICY FISCAL RETRENCHMENT FIXED EXCHANGE RATE FOREIGN EXCHANGE GDP IMPORTS INDEXATION INFLATION INFLATION RATE INFLATION RATES INTEREST RATE INTEREST RATES LABOR MARKET LEGISLATION LIQUIDITY M1 M2 MACROECONOMIC POLICIES MACROECONOMIC POLICY MARGINAL COST MARKET ECONOMIES MARKET STRUCTURE MONETARISTS MONETARY POLICY MONEY SUPPLY NOMINAL EXCHANGE RATE OIL PHILLIPS CURVE PRICE CHANGES PRICE SETTING PRICE STABILITY PUBLIC SECTOR PUBLIC SECTOR PRICES PURCHASING PURCHASING POWER REAL GDP REAL INTEREST RATES TERMS OF TRADE TRADABLE GOODS UNEMPLOYMENT UNEMPLOYMENT RATE VOLATILITY WAGES INFLATION RATES INFLATIONARY PRESSURES EMERGING ECONOMIES PERFORMANCE CRITERIA ECONOMIC MODELS CURRENCY MARKETS MONETARY INDICATORS FLOATING EXCHANGE RATES
Online Access:	http://documents.worldbank.org/curated/en/2004/04/3422996/explaining-forecasting-inflation-tukey http://hdl.handle.net/10986/14772

id	okr-10986-14772
recordtype	oai_dc
spelling	okr-10986-147722021-04-23T14:03:20Z Explaining and Forecasting Inflation in Turkey Domaç, Ilker ADMINISTERED PRICES AGGREGATE DEMAND CENTRAL BANK CENTRAL BANK INDEPENDENCE CENTRAL BANKS CONSUMER PRICE INFLATION CPI DEBT DEMAND CURVE DEMAND FOR MONEY DISEQUILIBRIUM DOMESTIC PRICE DOMESTIC PRICE LEVEL DOMESTIC PRICES ECONOMIC ACTIVITY ELASTICITY EMPIRICAL EVIDENCE EMPIRICAL INVESTIGATIONS EMPIRICAL STUDIES EXCESS DEMAND EXCESS SUPPLY EXCHANGE RATE EXCHANGE RATES EXPANSIONARY MONETARY POLICY EXTERNAL SHOCKS FISCAL ADJUSTMENT FISCAL DEFICIT FISCAL DEFICITS FISCAL POLICY FISCAL RETRENCHMENT FIXED EXCHANGE RATE FOREIGN EXCHANGE GDP IMPORTS INDEXATION INFLATION INFLATION RATE INFLATION RATES INTEREST RATE INTEREST RATES LABOR MARKET LEGISLATION LIQUIDITY M1 M2 MACROECONOMIC POLICIES MACROECONOMIC POLICY MARGINAL COST MARKET ECONOMIES MARKET STRUCTURE MONETARISTS MONETARY POLICY MONEY SUPPLY NOMINAL EXCHANGE RATE OIL PHILLIPS CURVE PRICE CHANGES PRICE SETTING PRICE STABILITY PUBLIC SECTOR PUBLIC SECTOR PRICES PURCHASING PURCHASING POWER REAL GDP REAL INTEREST RATES TERMS OF TRADE TRADABLE GOODS UNEMPLOYMENT UNEMPLOYMENT RATE VOLATILITY WAGES INFLATION RATES INFLATIONARY PRESSURES EMERGING ECONOMIES PERFORMANCE CRITERIA ECONOMIC MODELS PHILLIPS CURVE CURRENCY MARKETS EXCHANGE RATES MONETARY INDICATORS FLOATING EXCHANGE RATES MONETARY POLICY The growing adoption of an inflation targeting framework in emerging market economies has increased the importance of understanding inflation dynamics and forecasting its future path in these countries. The author considers the case of Turkey and investigates the performance of models that have some theoretical foundations. To this end, his study focuses on mark-up models, monetary models, and the Phillips curve. The findings suggest that the mark-up models have the best in-sample performance followed by money gap models and the Phillips curve. The empirical results from out-of-sample forecasting performance for the period covering the new economic program (May 2001-December 2002), however, show that the Phillips curve and the money gap models perform better than mark-up models. These findings, in turn, imply that (1) Phillips curves augmented with the exchange rate and money models might provide complementary views in the Turkish context; and (2) the relative importance of output gap and monetary disequilibrium in the inflation process has increased under the floating exchange rate regime. The results underscore the importance of relying on multiple models of inflation in the conduct of Turkish monetary policy. 2013-08-02T13:24:48Z 2013-08-02T13:24:48Z 2004-04 http://documents.worldbank.org/curated/en/2004/04/3422996/explaining-forecasting-inflation-tukey http://hdl.handle.net/10986/14772 English en_US Policy Research Working Paper;No.3287 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, D.C. Publications & Research :: Policy Research Working Paper Publications & Research Europe and Central Asia Turkey
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	ADMINISTERED PRICES AGGREGATE DEMAND CENTRAL BANK CENTRAL BANK INDEPENDENCE CENTRAL BANKS CONSUMER PRICE INFLATION CPI DEBT DEMAND CURVE DEMAND FOR MONEY DISEQUILIBRIUM DOMESTIC PRICE DOMESTIC PRICE LEVEL DOMESTIC PRICES ECONOMIC ACTIVITY ELASTICITY EMPIRICAL EVIDENCE EMPIRICAL INVESTIGATIONS EMPIRICAL STUDIES EXCESS DEMAND EXCESS SUPPLY EXCHANGE RATE EXCHANGE RATES EXPANSIONARY MONETARY POLICY EXTERNAL SHOCKS FISCAL ADJUSTMENT FISCAL DEFICIT FISCAL DEFICITS FISCAL POLICY FISCAL RETRENCHMENT FIXED EXCHANGE RATE FOREIGN EXCHANGE GDP IMPORTS INDEXATION INFLATION INFLATION RATE INFLATION RATES INTEREST RATE INTEREST RATES LABOR MARKET LEGISLATION LIQUIDITY M1 M2 MACROECONOMIC POLICIES MACROECONOMIC POLICY MARGINAL COST MARKET ECONOMIES MARKET STRUCTURE MONETARISTS MONETARY POLICY MONEY SUPPLY NOMINAL EXCHANGE RATE OIL PHILLIPS CURVE PRICE CHANGES PRICE SETTING PRICE STABILITY PUBLIC SECTOR PUBLIC SECTOR PRICES PURCHASING PURCHASING POWER REAL GDP REAL INTEREST RATES TERMS OF TRADE TRADABLE GOODS UNEMPLOYMENT UNEMPLOYMENT RATE VOLATILITY WAGES INFLATION RATES INFLATIONARY PRESSURES EMERGING ECONOMIES PERFORMANCE CRITERIA ECONOMIC MODELS PHILLIPS CURVE CURRENCY MARKETS EXCHANGE RATES MONETARY INDICATORS FLOATING EXCHANGE RATES MONETARY POLICY
spellingShingle	ADMINISTERED PRICES AGGREGATE DEMAND CENTRAL BANK CENTRAL BANK INDEPENDENCE CENTRAL BANKS CONSUMER PRICE INFLATION CPI DEBT DEMAND CURVE DEMAND FOR MONEY DISEQUILIBRIUM DOMESTIC PRICE DOMESTIC PRICE LEVEL DOMESTIC PRICES ECONOMIC ACTIVITY ELASTICITY EMPIRICAL EVIDENCE EMPIRICAL INVESTIGATIONS EMPIRICAL STUDIES EXCESS DEMAND EXCESS SUPPLY EXCHANGE RATE EXCHANGE RATES EXPANSIONARY MONETARY POLICY EXTERNAL SHOCKS FISCAL ADJUSTMENT FISCAL DEFICIT FISCAL DEFICITS FISCAL POLICY FISCAL RETRENCHMENT FIXED EXCHANGE RATE FOREIGN EXCHANGE GDP IMPORTS INDEXATION INFLATION INFLATION RATE INFLATION RATES INTEREST RATE INTEREST RATES LABOR MARKET LEGISLATION LIQUIDITY M1 M2 MACROECONOMIC POLICIES MACROECONOMIC POLICY MARGINAL COST MARKET ECONOMIES MARKET STRUCTURE MONETARISTS MONETARY POLICY MONEY SUPPLY NOMINAL EXCHANGE RATE OIL PHILLIPS CURVE PRICE CHANGES PRICE SETTING PRICE STABILITY PUBLIC SECTOR PUBLIC SECTOR PRICES PURCHASING PURCHASING POWER REAL GDP REAL INTEREST RATES TERMS OF TRADE TRADABLE GOODS UNEMPLOYMENT UNEMPLOYMENT RATE VOLATILITY WAGES INFLATION RATES INFLATIONARY PRESSURES EMERGING ECONOMIES PERFORMANCE CRITERIA ECONOMIC MODELS PHILLIPS CURVE CURRENCY MARKETS EXCHANGE RATES MONETARY INDICATORS FLOATING EXCHANGE RATES MONETARY POLICY Domaç, Ilker Explaining and Forecasting Inflation in Turkey
geographic_facet	Europe and Central Asia Turkey
relation	Policy Research Working Paper;No.3287
description	The growing adoption of an inflation targeting framework in emerging market economies has increased the importance of understanding inflation dynamics and forecasting its future path in these countries. The author considers the case of Turkey and investigates the performance of models that have some theoretical foundations. To this end, his study focuses on mark-up models, monetary models, and the Phillips curve. The findings suggest that the mark-up models have the best in-sample performance followed by money gap models and the Phillips curve. The empirical results from out-of-sample forecasting performance for the period covering the new economic program (May 2001-December 2002), however, show that the Phillips curve and the money gap models perform better than mark-up models. These findings, in turn, imply that (1) Phillips curves augmented with the exchange rate and money models might provide complementary views in the Turkish context; and (2) the relative importance of output gap and monetary disequilibrium in the inflation process has increased under the floating exchange rate regime. The results underscore the importance of relying on multiple models of inflation in the conduct of Turkish monetary policy.
format	Publications & Research :: Policy Research Working Paper
author	Domaç, Ilker
author_facet	Domaç, Ilker
author_sort	Domaç, Ilker
title	Explaining and Forecasting Inflation in Turkey
title_short	Explaining and Forecasting Inflation in Turkey
title_full	Explaining and Forecasting Inflation in Turkey
title_fullStr	Explaining and Forecasting Inflation in Turkey
title_full_unstemmed	Explaining and Forecasting Inflation in Turkey
title_sort	explaining and forecasting inflation in turkey
publisher	World Bank, Washington, D.C.
publishDate	2013
url	http://documents.worldbank.org/curated/en/2004/04/3422996/explaining-forecasting-inflation-tukey http://hdl.handle.net/10986/14772
_version_	1764430164795588608

Explaining and Forecasting Inflation in Turkey

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