Articles on Monetary Economics

Date

2026-1-23

Author

Güzel, Adviye Hazal

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This thesis investigates inflation from macroeconomic and microeconomic perspectives. It highlights that effective inflation stabilization requires credible institutions, transparent communication and an understanding of how households perceive and process price information. Without institutional credibility, fiscal coherence and financial resilience, the benefits of inflation targeting (IT) may fail to materialize. Improvements in financial literacy and communication strategies can help anchor inflation expectations. This thesis addresses two gaps in the literature in the context of emerging and developing economies. First, the macroeconomic effects of IT remain ambiguous once policy self-selection and institutional heterogeneity are taken into account. Previous studies underexplore broader macroeconomic trade-offs, including economic growth, output volatility, exchange rate dynamics and fiscal performance. Second, there is a gap between macro-level monetary policy frameworks and micro-level inflation belief formation. In particular, limited attention has been paid to how individuals process inflation information and how financial literacy shapes inflation perceptions and expectations in high-inflation environments characterized by weak central bank credibility. This thesis jointly examines the macroeconomic consequences of IT under institutional constraints and the formation of inflation perceptions and expectations in high-inflation settings. This gap is addressed through a combination of a macroeconomic evaluation of IT adoption using propensity score matching and micro-level evidence from Türkiye, a country with persistent high inflation and challenges to central bank credibility. The findings demonstrate that structural constraints and cognitive frictions jointly determine inflation outcomes. Moreover, effective inflation stabilization requires not only appropriate policy frameworks but also institutional credibility, fiscal coherence and financially literate economic agents.

Subject Keywords

Emerging countries, Inflation targeting, Propensity score matching, Behavioral economics, Financial literacy

URI

https://hdl.handle.net/11511/118359

Collections

Graduate School of Social Sciences, Thesis