The purpose of this study is to estimate a reaction function used by monetary authority in conducting its policies for the period of 1987-2000 in Turkey. A time varying parameter model with heteroskedastic disturbances is used in the estimation procedure. Results indicate that there had been an unstable relationship between the growth rate of currency in circulation used as policy instrument, and the volatility of inflation. This finding supports the fact why contractionary monetary policy alone had not been sufficient to reduce inflation during the sample period as a result of uncertainty, which was due to the changes in regression coefficients of the policy reaction function.
Alan : Eğitim Bilimleri; Sosyal, Beşeri ve İdari Bilimler
Dergi Türü : Uluslararası
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