THE MONEY SUPPLY MECHANISM IN TURKEY

Date

1978

Author

FRY, Maxwell J,

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This paper examines Turkey's money supply process in an attempt to explain the inflationary accelerations in monetary growth which occurred in the 1950s and 1970s. The analysis suggests that accelerated monetary expansion originated in rapid increases in foreign exchange receipts, which raised net foreign assets. Rather than sterilising the effect of higher net foreign assests on the money supply, the central bank responded by expanding domestic credit to finance a greater volume of capital equipment and raw material imports. The central bank then followed the real bills doctrine, accommodating with a lag demand pressures generated by the accelerating rise in nominal gross national product. This inflationary spiral was checked only after the economy had suffered acute balance of payments disruptions.

URI

https://hdl.handle.net/11511/111020

Collections

Department of Economics, Article