Perspectives on High Real Interest Rates in Turkey

October 1, 2008

Preview Citation

Format: Chicago

Prakash Kannan. Perspectives on High Real Interest Rates in Turkey, (USA: International Monetary Fund, 2008) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Subject: Exchange rate risk, Inflation, Interest rate parity, Real interest rates, Return on investment

Keywords: Forward rate, Inflation rate, Risk premium, WP

Publication Details

Pages:

31
Volume:

---
DOI:

---
Issue:

---
Series:

Working Paper No. 2008/251
Stock No:

WPIEA2008251
ISBN:

9781451871098
ISSN:

1018-5941

FACTSHEETS

RESOURCES

TOPICS

Flagship Publications

Other Publications

IMF reports and publications by country

Regional Offices

All News

See Also

For Journalists

Press Center

RESOURCES

FLAGSHIPS

KEY SERIES

IMF NOTES

IMF Working Papers