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Inflation Threshold Effect on Economic Growth in Turkey
Inflation Threshold Effect on Economic Growth in Turkey

Author(s): Ömer ESEN, Celil Aydın, Recai Aydin
Subject(s): Economy
Published by: ASERS Publishing
Keywords: inflation threshold; economic growth; inflation target; threshold auto regressive model

Summary/Abstract: In this study, the role of inflation threshold effect on economic growth has been investigated for Turkey in the 2002:Q1 – 2015:Q1 period. At the first stage, inflation threshold value has been detected. After that, inflation￾economic growth relation has been examined using threshold auto regressive (TAR) model. Results indicate that there is a nonlinear relationship between inflation and growth rate; the threshold for the influence of inflation on economic growth is 8.89%; and an inflation rate above this threshold has a negative influence on economic growth while an inflation rate below this threshold has a positive influence on economic growth. In this regard, it is important to achieve sustainable growth, which plays a crucial role in increasing the efficiency of implemented monetary policies and assuring stability. Therefore, political and economic decision-makers should not ignore the concept of threshold within the scope of monetary policy while determining the target inflation rate in their efforts to deal with inflation.

  • Issue Year: VII/2016
  • Issue No: 22
  • Page Range: 1983-1993
  • Page Count: 11
  • Language: English