Perspectives on High Real Interest Rates in Turkey
Electronic Access:
Free Download. Use the free Adobe Acrobat Reader to view this PDF file
Summary:
The Turkish economy is typically characterized as having particularly high real interest rates. Fundamental considerations, such as high growth rates or high returns to capital, do not provide a satisfactory resolution of this puzzle. Instead, we find that two other factors- doubts about the sustainability of disinflation and the existence of a risk premium-have a significant impact on the level of real interest rates in Turkey. Importantly, fiscal policy variables are shown to affect both these factors, suggesting that a more credible and prudent fiscal policy can help reduce real interest rates in Turkey.
Series:
Working Paper No. 2008/251
Subject:
Exchange rate risk Inflation Interest rate parity Real interest rates Return on investment
English
Publication Date:
October 1, 2008
ISBN/ISSN:
9781451871098/1018-5941
Stock No:
WPIEA2008251
Pages:
31
Please address any questions about this title to publications@imf.org