Inflation, Output, and Stabilization in a High Inflation Economy: Turkey, 1980-2000

University of Illinois at Urbana-Champaign, College of Commerce and Business Administration, Office of Research Working Papers, No. 01-0112.

32 Pages Posted: 29 Jul 2001

See all articles by Aykut Kibritçioğlu

Aykut Kibritçioğlu

Ankara University

Selahattin Dibooglu

University of Missouri at Saint Louis - Department of Economics

Date Written: July 2001

Abstract

This paper surveys and examines the sources of fluctuations in inflation and output in Turkey. Using a dynamic open economy aggregate supply - aggregate demand model with imperfect capital mobility and structural vector-autoregressions, the authors consider real oil price, supply, balance of payments, real demand, and monetary disturbances. Empirical results indicate that inflation is driven by monetary and real demand disturbances while output is mainly driven by aggregate supply disturbances. The historical decomposition shows that a substantial portion of inflation is aggregate demand-driven core inflation. A credible disinflation program accompanied by structural reform is likely to stabilize the economy with little output costs.

Keywords: Stabilization Policy, Causes and Effects of Inflation, Inflation Theories, Turkey, Theory of Aggregate Supply and Aggregate Demand, Time Series Models

JEL Classification: E31, E23, F41, C32

Suggested Citation

Kibritçioğlu, Aykut and Dibooglu, Selahattin, Inflation, Output, and Stabilization in a High Inflation Economy: Turkey, 1980-2000 (July 2001). University of Illinois at Urbana-Champaign, College of Commerce and Business Administration, Office of Research Working Papers, No. 01-0112., Available at SSRN: https://ssrn.com/abstract=277975 or http://dx.doi.org/10.2139/ssrn.277975

Aykut Kibritçioğlu

Ankara University ( email )

AUSBF Iktisat Bolumu, Cebeci
Ankara, 06590
Turkey
+90-312-5951274 (Phone)
+90-312-3197736 (Fax)

HOME PAGE: http://kibritcioglu.com/iktisat/

Selahattin Dibooglu (Contact Author)

University of Missouri at Saint Louis - Department of Economics ( email )

8001 Natural Bridge Road
St Louis, MO 63121
United States

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