Monetary Pressures and Inflation Dynamics in Turkey: Evidence from P-Star Model

This paper uses the P-star model to explain inflation dynamics in Turkey. In P-star models, money determines the price gap, which is postulated to measure the pressure on prices in an economy. This pressure emerges when output is above the potential, the interest rate is lower than the natural rate,...

Full description

Saved in:
Bibliographic Details
Published in:Emerging markets finance & trade 2009-11, Vol.45 (6), p.69-86
Main Authors: Mesut, SaygılÄ, Azim, Özdemir, K
Format: Article
Language:English
Subjects:
Economic models
Inflation
inflation dynamics
Money
money demand
P-star
Phillips curve
Prices
Studies
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This paper uses the P-star model to explain inflation dynamics in Turkey. In P-star models, money determines the price gap, which is postulated to measure the pressure on prices in an economy. This pressure emerges when output is above the potential, the interest rate is lower than the natural rate, or there is pure excess money in the economy. The estimation results with the Turkish data show that the price gap contains considerable information for explaining inflation dynamics. Moreover, the model selection criterion that compares the empirical performance of the P-star model with the new classical Phillips curve relation favors the P-star model over the Phillips curve relationship. We conclude that money is efficacious in predicting risk in price stability in Turkey.
ISSN:1540-496X
1558-0938
DOI:10.2753/REE1540-496X450605