Would "Cold Turkey" Work in Turkey?

By Gaston Gelos, Alessandro Prati, Oya Celasun

March 1, 2003

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Gaston Gelos, Alessandro Prati, and Oya Celasun. Would "Cold Turkey" Work in Turkey?, (USA: International Monetary Fund, 2003) accessed December 3, 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

Persistently high inflation rates have led many to believe that inflation in Turkey has become "inertial," posing an obstacle to disinflation. We assess the empirical validity of this argument. We find that the current degree of inflation persistence in Turkey is lower than in Brazil and Uruguay prior to their successful stabilization programs. More significantly, expectations of future inflation are more important than past inflation in shaping the inflation process, providing little evidence of "backward-looking" behavior. Using survey data, we find that inflation expectations, in turn, depend largely on the evolution of fiscal variables.

Subject: Disinflation, Fiscal policy, Fiscal stance, Government debt management, Inflation, Inflation persistence, Prices, Public financial management (PFM)

Keywords: Cost, CPI index, Disinflation, Disinflation attempt, Disinflation strategy, Fiscal stance, Government debt management, Inertia, Inflation, Inflation expectation, Inflation persistence, Inflation persistence, Price, Price rigidities, Stabilization, Turkey, Variable, WP

Publication Details

Pages:

20
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/049
Stock No:

WPIEA0492003
ISBN:

9781451846867
ISSN:

1018-5941

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