Inflation and Disinflation Policy in Turkey between 1974-2002: LSTVAR Analysis

Abstract

Persistent high inflation rate is one of the basic problems of Turkish economy until recent years. For solving the high inflation problem, several disinflation programs were put into force under the auspices of International Monetary Fund in 1980, 1994, 1999 and 2001. But, implementation of the disinflation policies was temporary and unstable under the political instabilities. From 1974 to 2002, political instabilities mainly influenced economic policies and implementation of the stabilization programs in Turkey. In this paper, we aimed to show the implementation of disinflation policy is difficult in political instability periods. We will investigate the cost of disinflation policies under the political instability and test by LSTAR-VAR (LSTVAR) analysis the cost of disinflation policies in the context of stabilization programs in Turkey between 1974 and 2002.

Keywords: Nonlinear, LSTAR VAR, Disinflation

JEL Classification: C32, E31