Browsing by Subject "Inflation inertia"

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    Dynamics of inflation and inflation inertia in Turkey
    (Statistical Economic and Social Research and Training Centre for Islamic Countries, 2004) Özcan, K. M.; Berument, Hakan; Neyaptı, B.
    This paper investigates the inflation dynamics in Turkey between 1988 and 2000. Using model-free techniques, we first observe that there is strong inertia in Turkish inflation. Next, we look at the correlations between Consumer Price Index (CPI) inflation and the leads and lags of the various possible determinants of CPI inflation. The evidence indicates that there are significant positive correlations between the dynamics of housing rents and the CPI, and both the US Dollar and German Mark exchange rates and the CPI. Contrary to expectations, however, data show both a negative relationship between wage and price dynamics and a negative lagged effect of import price inflation on the CPI inflation. The evidence also indicates a negative lagged impact of inflation received by farmers on CPI inflation and a positive lagged response of the CPI to it.
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    Optimal univariate expectations under high and persistent inflation: new evidence from Turkey
    (Elsevier BV, 2005) Us, V.; Ozcan, K. M.
    The poor performance of sticky-price models with rational expectations in explaining the inflationary inertia in the US economy constitutes the basis for sticky-price models of near-rational expectations in the recent literature. However, previous studies on inflationary inertia in Turkey not only lack a model of nominal stickiness but also do not try to explain inflation persistence by expectations. Even though, there exists evidence for persistent inflation in Turkey as confirmed by earlier studies, and other studies provide evidence that expectations are neither perfectly rational nor purely adaptive, there is no attempt to link this near-rational behavior to inflationary inertia. Given this gap, this paper, therefore, tests empirically a sticky-price model under the assumption of near-rational expectations on two different inflation episodes in the Turkish economy. The near-rational expectations as described by optimal univariate expectations where agents use information on past inflation optimally while data on other variables are ignored, not only fit the data for both periods but also are not subject to Lucas critique. Alternatively, near-rational expectations are assumed to be backward looking. This alternative scenario shows that optimal univariate expectations perform even better during relatively higher inflation periods. © 2004 Elsevier B.V. All rights reserved.