TITLE:
Inflation Targeting in Turkey
AUTHORS:
Fazıl Kayıkçı, Sümeyye Kaplan
KEYWORDS:
Macroeconomics, Monetary Policy, Inflation Targeting
JOURNAL NAME:
Theoretical Economics Letters,
Vol.9 No.7,
August
30,
2019
ABSTRACT: Inflation targeting strategy has emerged as the result of new pursuits and researches
actualized due to insufficiency of monetary policies—implemented
for price stability by the central banks until 1990s—in reaching the
required consequences in both developed and developing countries, and this
strategy had initially been implemented in New Zealand. As this strategy has
indicated a successful performance since its implementation, it has become a
targeting strategy that many countries struggling with high inflation—including
Turkey—prefer and put into practice. In this study, the inflation
targeting policy’s conformity to country’s economic cycle, its success, and its
effect on macroeconomic factors were analyzed via the model formed by the use
of GDP, exchange rate, CPI, interest rate, output gap, and crude oil prices.
Inflation targeting regime was examined for the period of 1996:1-2018:4 via the
VAR Model, Granger Causality Test, and action-reaction analyses. The results
obtained have indicated the presence of expectation and cost inflation, and
that it is triggering the inflation. Moreover, it has been observed that
inability to reach the targeted value, and inclining trend of inflation are causing
uncertainty of inflation.