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      Public sector pricing behavior and inflation risk premium in Turkey

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      Author(s)
      Berument, Hakan
      Date
      2003
      Source Title
      Eastern European Economics
      Print ISSN
      0012-8775
      Electronic ISSN
      1557-9298
      Publisher
      Routledge
      Volume
      41
      Issue
      1
      Pages
      68 - 78
      Language
      English
      Type
      Article
      Item Usage Stats
      190
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      166
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      Abstract
      Turkey has had a high level of inflation since the mid-1970s. Governments use various fiscal and monetary policy tools to control inflation. In addition to these tools, governments also attempt to control inflation by regulating the prices of publicly produced goods and services. Governments either use the publicly produced goods' prices as a nominal anchor to decrease inflation, for example, the July 1997 and early 2000 anti-inflation programs, as a part of their general anti-inflation programs, or they try to postpone price increases of publicly produced goods and services until after elections, as was the case prior to the 1991, 1995, and 1999 elections. However, governments ultimately had to correct the lower prices in the public sector, mainly to avoid losses in the state-owned enterprises. In accordance with this, Turkish data suggest that, on average, price increases in the private and public sectors are approximately the same; however, these price increases are less frequent in the public sector than in the private sector. The purpose of this article is to show that this infrequency of price changes in the public sector increases the volatility of the general price level, causing uncertainty in forecasting general price level, and this, in turn, increases interest rates.
      Keywords
      Inflation uncertainty
      Interest rate
      Monetary policy
      Pricing policy
      Public pricing
      Turkey
      Permalink
      http://hdl.handle.net/11693/24556
      Published Version (Please cite this version)
      https://doi.org/10.1080/00128775.2003.11041041
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      • Department of Economics 669
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