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dc.contributor.authorTutar, Eseren_US
dc.date.accessioned2014-03-14T20:42:27Z
dc.date.available2014-03-14T20:42:27Z
dc.date.issued2002-07-18en_US
dc.identifier.otheretd-08012002-110233en_US
dc.identifier.urihttp://hdl.handle.net/10919/34288
dc.description.abstractThe Inflation Targeting in Developing Countries and Its Applicability to the Turkish Economy Eser Tutar ABSTRACT Inflation targeting is a monetary policy regime, characterized by public announcement of official target ranges or quantitative targets for price level increases and by explicit acknowledgement that low inflation is the most crucial long-run objective of the monetary authorities. There are three prerequisites for inflation targeting: 1) central bank independence, 2) having a sole target, 3) existence of stable and predictable relationship between monetary policy instruments and inflation. In many developing countries, the use of seigniorage revenues as an important source of financing public debts, the lack of commitment to low inflation as a primary goal by monetary authorities, considerable exchange rate flexibility, lack of substantial operational independence of the central bank or of powerful models to make domestic inflation forecasts hinder the satisfaction of these requirements. This study investigates the applicability of inflation targeting to the Turkish economy. Central bank independence in Turkey has been mainly hindered by "fiscal dominance" through monetization of high budget deficits. In addition, although serious steps have been taken recently under a new law to have an independent central bank, such as formal commitment to the achievement of price stability as the primary objective and the prohibition of credit extension to the government, the central bank does not satisfy independence criteria due to the problems associated with the appointment of the government and the share of the Treasury within the bank. Having a sole inflation target was hindered by the existence of fixed exchange rate system throughout the years. However, in February 2001, Turkey switched to a floating exchange rate regime, which is important for a successful inflation-targeting regime. Having a sole target within the system has also been supported by the new central bank law, which gives priority to price stability and supports any other objective as long as it is consistent with price stability. In this thesis, an empirical investigation has been made in order to assess the statistical readiness of Turkey to satisfy the requirements of inflation-targeting by making use of vector autoregressive (VAR) models. The results suggest that inflation is an inertial phenomenon in Turkey and money, interest rates and nominal exchange rates innovations are not economically and statistically important determinants of prices. Most of the variances in prices are explained by prices themselves. According to the VAR evidence, the direct linkages between monetary policy instruments and inflation do not seem to be strong, stable, and predictable. As a result, while the second requirement of the inflation-targeting regime seems to have been satisfied, there are still problems associated with the central bank independence and the existence of stable and predictable relationship between monetary policy instruments and inflation in Turkey.en_US
dc.publisherVirginia Techen_US
dc.relation.haspartThesis.pdfen_US
dc.rightsI hereby certify that, if appropriate, I have obtained and attached hereto a written permission statement from the owner(s) of each third party copyrighted matter to be included in my thesis, dissertation, or project report, allowing distribution as specified below. I certify that the version I submitted is the same as that approved by my advisory committee. I hereby grant to Virginia Tech or its agents the non-exclusive license to archive and make accessible, under the conditions specified below, my thesis, dissertation, or project report in whole or in part in all forms of media, now or hereafter known. I retain all other ownership rights to the copyright of the thesis, dissertation or project report. I also retain the right to use in future works (such as articles or books) all or part of this thesis, dissertation, or project report.en_US
dc.subjectCentral Bank independenceen_US
dc.subjectVector autoregressiveen_US
dc.subjectInflation-targetingen_US
dc.titleInflation Targeting in Developing Countries and Its Applicability to the Turkish Economyen_US
dc.typeThesisen_US
dc.contributor.departmentEconomicsen_US
dc.description.degreeMaster of Artsen_US
thesis.degree.nameMaster of Artsen_US
thesis.degree.levelmastersen_US
thesis.degree.grantorVirginia Polytechnic Institute and State Universityen_US
thesis.degree.disciplineEconomicsen_US
dc.contributor.committeechairOrden, David R.en_US
dc.contributor.committeememberAshley, Richard A.en_US
dc.contributor.committeememberHilmer, Christiana E.en_US
dc.identifier.sourceurlhttp://scholar.lib.vt.edu/theses/available/etd-08012002-110233/en_US
dc.date.sdate2002-08-01en_US
dc.date.rdate2003-08-01
dc.date.adate2002-08-01en_US


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