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From Disinflation to Renewed Pressures: Inflation Targeting and Inflation Uncertainty in Turkey

Authors: Noura Abu Asab; Alaa Khashashneh;

From Disinflation to Renewed Pressures: Inflation Targeting and Inflation Uncertainty in Turkey

Abstract

This paper examines how inflation and inflation uncertainty behave in Turkey after the move to a fully fledged inflation targeting (IT) regime. Using monthly inflation data from 2000-2018, we estimate an ARMA model for inflation dynamics and a GARCH model to capture time-varying inflation uncertainty. The ARMA results indicate meaningful persistence in inflation, with prior-period inflation expectations positively linked to realized inflation. Consistent with this, the inflation trend shows that, apart from crisis episodes in 2001 and 2011, realized inflation generally remained below forecasted price levels following the adoption of full-fledged IT. At the same time, the GARCH estimates point to pronounced volatility in inflation shocks, suggesting that inflation uncertainty remained elevated. Overall, the evidence supports the view that credibility gains under IT can improve inflation outcomes, but that vulnerability to external shocks persists, underscoring the role of exchange-rate management and clear policy communication.

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selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
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