Theoretical and Applied Economics
No. 3 / 2015 (604), Autumn
Is CPI a suitable tool for inflation targeting? A critical view
Necmettin Erbakan University, Turkey
Muhsin KAR
Necmettin Erbakan University, Turkey
Ahmet ŞAHBAZ
Gaziantep University, Turkey
Abstract. Since Frankel (2011, 2012) criticizes the choice of consumer price index as a policy index for its adverse impacts on the output in the developing economies, economists suggest different policy proposals in order to stabilize price level. One of them is to change price index in measurement of inflation. In this study, we investigate the suitability of an alternative price index in inflation targeting regime instead of consumer price index in Turkish economy. In this regard, we employ the producer price index instead of consumer price index in order to investigate the suitability of Frankel’s policy proposals. The empirical results, obtained from conventional VAR analysis suggest that the impact of producer price on the inflation rate is in the short term and it is weak. Similarly, MS-VAR analysis by utilizing the monthly data for the period 2003M2 - 2013M6, show that there is not a significant impact of producer price on the inflation rate during the expansionary period and it is also possible to talk about the effect of supply side shocks in the recession regime. Therefore, the consumer price index seems to be an appropriate instrument to target inflation rate, but the producer price index should also take into account to target inflation during the recessionary period in Turkey.
Contents
A Structural VAR analysis of Fiscal shocks on current accounts in Greece
Is CPI a suitable tool for inflation targeting? A critical view
A new beginning for SMEs development?
About the conceptualization of social innovation
Economic models of voting: an empirical study on the electoral behavior in Romanian 2012 parliamentary elections
Revisit Export and GDP Nexus in China and Taiwan: A Rolling Window Granger Causality Test
Sustainability of balancing item of balance of payment for OECD countries: evidence from Fourier Unit Root Tests
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Analysis of final consumption and gross investment influence on GDP – multiple linear regression model
A survey of the effect of trade openness size on inflation rate in Iran using ARDL
A labor utility index to measure worker welfare and labor market performance
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Liquidity ratios. A structural and dynamic analysis, during 2006-2012, of the companies having the business line in industry and construction, listed and traded on the Bucharest Stock Exchange
The Romanian banking sector restructuring and the economic recovery
Towards a sustainable economy
The role and influence of the political factor in establishing the financial and budgetary balance and on national stability
European integration, as an approximation of globalisation: a statistical analysis based on stratified entropy indexes of concentration
The factors that affect on foreign direct investments in Turkey (sectoral comparisons)
Legislative contributions to improving the economic efficiency of the medical laboratories in Romania