Optimal univariate expectations under high and persistent inflation: new evidence from Turkey

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dc.citation.epage517en_US
dc.citation.issueNumber3-4en_US
dc.citation.spage499en_US
dc.citation.volumeNumber346en_US
dc.contributor.authorUs, V.en_US
dc.contributor.authorOzcan, K. M.en_US
dc.date.accessioned2018-04-12T13:45:25Z
dc.date.available2018-04-12T13:45:25Z
dc.date.issued2005en_US
dc.departmentDepartment of Economicsen_US
dc.description.abstractThe 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.en_US
dc.identifier.doi10.1016/j.physa.2004.08.001en_US
dc.identifier.eissn1873-2119
dc.identifier.issn0378-4371
dc.identifier.urihttp://hdl.handle.net/11693/38135
dc.language.isoEnglishen_US
dc.publisherElsevier BVen_US
dc.relation.isversionofhttp://dx.doi.org/10.1016/j.physa.2004.08.001en_US
dc.source.titlePhysica A : Statistical Mechanics and its Applicationsen_US
dc.subjectInflation inertiaen_US
dc.subjectLucas critiqueen_US
dc.subjectOptimal univariate expectationsen_US
dc.subjectTurkish economyen_US
dc.subjectCostsen_US
dc.subjectData processingen_US
dc.subjectIndustrial economicsen_US
dc.subjectMathematical modelsen_US
dc.subjectPublic policyen_US
dc.subjectFinancial data processingen_US
dc.titleOptimal univariate expectations under high and persistent inflation: new evidence from Turkeyen_US
dc.typeArticleen_US

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