Two essays on dynamic macroeconomics

Abstract

First chapter of this research assesses the stability of the money-income relationship for seven OECD countries by using the data from 1960’s to 2000’s. The short run relationships between monetary policy and output have strong evidences. When the sample was split into two sub samples: pre and post 1980, the empirical evidence presented in this research shows that even if the inferences gathered across countries are not always parallel, the inferences gathered from the VAR specification across the samples for each country are mostly parallel. In this article secondly, by using the 1990 input-output table, the inflationary effects of crude oil prices are investigated for Turkey. Under fixed nominal wages, profits, interest and rent earnings, the effect of increasing prices of oil on inflation is limited. However, when wages and the other three factors of income (profit, interest and rent) are adjusted to the general price level that includes the oil price increases, then the inflationary effect of oil prices becomes significant. Hence, indexation could have very severe effects on an economy when oil prices increase.