Inflation targeting and fiscal dominance : evidence from Turkey

Download

index.pdf

Date

2007

Author

Sel, Tuğba

Metadata

Show full item record

Item Usage Stats

122
views

68
downloads

This study investigates the significance of fiscal dominance for an inflation targeting regime in the context of the recent Turkish experience. To this end, capital flows and country risk equations are estimated for the Turkish monthly data pertaining the inflation targeting regime implementation period. The results from the capital flows models based on portfolio approach strongly suggest that the real effective exchange rates in Turkey during the period are determined by foreign interest rates and the Emerging Markets Bond Index (EMBI) but not by the domestic interest rates in the long run. This supports the view that the risk premium channel dominates the standard portfolio channel in the determination of real exchange rates in Turkey during the period. The country risk of Turkey, proxied by the EMBI spread in the long run is determined by risk appetite of foreign investors and domestic variables including real debt stock, real consolidated budget balance, international gross reserves, current account deficits and credit ratings. All these results are found to be important manifestations of the presence fiscal dominance in Turkey. Consequently, contrary to the postulations of the conventional monetary policy transmission mechanism, interest rate increases to cope with inflationary pressures may lead to an inflation acceleration, rather than the reverse.

URI

http://etd.lib.metu.edu.tr/upload/12608846/index.pdf
https://hdl.handle.net/11511/16973

Collections

Graduate School of Social Sciences, Thesis

Suggestions

OpenMETU
Core

Inflation targeting and financial dollarization: an empirical investigation Gökten, Selin; Özmen, Erdal; Department of Economics (2008) This study investigates the implications of financial dollarization for inflation targeting framework. To this end, monetary policy rule, inflation targeting performance and international reserves equations are estimated for twenty four inflation targeting countries with different levels of financial dollarization. The results based on the panel data estimations indicate that monetary policy rule and behavior of accumulating international reserves are affected by the degree of financial dollarization. Furth...
Fiscal Decentralization and Socio-economic Outcomes in Turkey: An Empirical Investigation Neyaptı, Bilin (Orta Doğu Teknik Üniversitesi (Ankara, Turkey), 2005-12) This study examines the status of fiscal decentralization and its relationship with socio-economic indicators in Turkey. As theoretical literature is ambiguous on the merits of fiscal decentralization, international evidence confirms this ambiguity by stressing the important role of administrative and political decentralization in obtaining the benefits of fiscal decentralization. Empirical evidence in this paper regarding the relationship between various socio-economic indicators and fiscal decentralizati...
Monetary policy operating framework for financial and price stability: the case of Turkey Çufadar, Ali; Özmen, Erdal; Department of Economics (2012) This thesis aims to provide evidence on whether FDI occurring in the Turkish economy has any effect on domestic firms, especially whether and to what extent it leads to KTTs towards domestic firms by paying attention to the role of MNCs. In order to do so, we firstly conduct a series of econometric analyses to analyze the impact of FDI-related technology spillovers on domestic firms’ productivity level in the Turkish manufacturing industry. Estimation results produced positive evidence on horizontal and bac...
Interest Rate Smoothing and Macroeconomic Instability under Post-Capital Account Liberalization Turkey Cömert, Hasan; Olcum, Gokce Akin (2010-01-01) This paper considers the interest rate policy of the Central Bank of the Republic of Turkey (CBRT) in the post-financial liberalization and deregulation era. We find that (1) the Bank's interest rate smoothing tendency is the main determinant of its monetary policy in this period, (2) the CBRT does not seem to be responsive to the developments in real economy (output), and (3) although inflation targeting central banks are not supposed to pay attention to exchange rates, the CBRT appears to be slightly resp...
Poverty and Turkish labor markets Erdil, Erkan (Orta Doğu Teknik Üniversitesi (Ankara, Turkey), 2007-12-1) This study aims to determine the relations between poverty and the dynamics of Turkish labor market. In this context, two secondary aims are also targeted. First is to demonstrate the situation of the poor in Turkey with international comparisons by employing various socio-economic measures. Second, is to clarify the poverty problem in Turkey in the framework of Turkish labor markets and to offer some policy recommendations directed towards Turkish labor markets. The study finds out endogenous relations bet...

Citation Formats

T. Sel, “ Inflation targeting and fiscal dominance : evidence from Turkey ,” M.S. - Master of Science, Middle East Technical University, 2007.